Snaprays v. Ontel Products Corporation et al

Filing 78

MEMORANDUM DECISION AND ORDER DENYING MOTION TO DISMISS AND GRANTING MOTION TO AMEND-denying 58 Motion to Dismiss for Lack of Jurisdiction ; granting 70 Motion for Leave to File. See Order for details. Signed by Judge Clark Waddoups on 5/22/17. (jmr)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH CENTRAL DIVISION
MEMORANDUM DECISION AND
ORDER DENYING MOTION TO
DISMISS AND GRANTING MOTION
TO AMEND

SNAPRAYS, LLC dba SNAPPOWER,
Plaintiff,
vs.

Case No. 2:16-cv-01198

ONTEL PRODUCTS CORPORATION and
ASHOK “CHUCK” KHUBANI,

Judge Clark Waddoups

Defendants.

INTRODUCTION
This matter is before the court on Defendants’ Ontel Products Corporation and Ashok
“Chuck” Khubani’s (collectively Ontel Defendants) Motion to Dismiss for Lack of Personal
Jurisdiction1 and Plaintiff SnapRay L.L.C., dba SnapPower’s, Motion for Leave to Amend.2
BACKGROUND
Ontel Products Corporation (“Ontel”) is a New Jersey corporation with its principal place
of business in Essex County, New Jersey. Its objective is to market, distribute and sell
affordable consumer goods.3 Ontel’s Vice-President of Product Strategy and Business
Development Jason Biziak (“Biziak”) was “intimately involved in the lighted wall outlet cover

1

Dkt. No. 58.

2

Dkt. No. 70.

3

Declaration of Jason Biziak (“Biziak Decl.”) at ¶ 4.

1

plate project which resulted in a product Ontel eventually decided to market, distribute and sell
under the trademark Night Angel.”4
Plaintiff SnapRays, L.L.C. dba SnapPower (“SnapPower”) is a company based in Utah
County.5 SnapPower designs, manufactures and sells a product it calls Guidelight, which is an
electric outlet cover with built-in LED lighting and other related outlet cover products. Ontel’s
Night Angel product competes with the Guidelight. SnapPower alleges that prior to developing
Night Angel the Ontel Defendants purchased its products to examine and duplicate them.6 In
fact, SnapPower claims that between August 29 and November 4, 2016, Ontel’s founder and
CEO Ashok “Chuck” Khubani (“Khubani”) personally purchased product with the intent to
create knock-offs.7 The SnapPower product was shipped to Ontel’s business address. In
addition, SnapPower alleges the Ontel Defendants marketed Night Angel on a website called
www.buynightangel.com, and many of the images on that site are identical or photoshopped
images of photographs from SnapPower’s website, including a photograph taken in the home of
SnapPower’s CEO.8 Finally, SnapPower claims the Ontel Defendants developed a one-minute
thirty-second national television commercial by incorporating a marketing video featured on its

4

Biziak Decl. at ¶ 10.

5

See Amended Complaint and Jury Demand (Dkt. No. 57 at ¶ 1).

6

Id. at ¶¶ 13, 29.

7

Id. at ¶ 29.

8

Id. at ¶¶ 14, 24-25, 62-64; see also Leishman Decl. at ¶¶ 14-22.

2

website.9 SnapPower alleges it did not authorize the use of its website, images or video to any
third party.10
When the original suit was filed on November 28, 2016, it included two additional
defendants, Telebrands Corporation (“Telebrands”) and Ajit “AJ” Khubani (“AJ”).11 Telebrands
and AJ were later dismissed pursuant to a stipulated motion.12 The original suit also included
four patent claims. With the original complaint, SnapPower filed a Motion for Temporary
Restraining Order (“TRO”).13
The court held a hearing on the TRO, and on December 1, 2016, signed a Temporary
Restraining Order. Thereafter, the court, at the request of plaintiff and the Ontel Defendants,
entered a Stipulated Preliminary Injunction Order on December 14, 2016.14 Two months later,
on February 14, 2017, the Ontel Defendants field a Motion to Dismiss alleging lack of personal
jurisdiction.15
Previously, in late January 2017, the Ontel Defendants provided SnapPower with samples
of the Night Angel product. The Ontel Defendants contend Night Angel had been “wholly

9

Id. at ¶¶ 24-26.

10

Id. at ¶ 14.

11

Dkt. No. 2.

12

Dkt. No. 60.

13

Dkt. No. 5.

14

Dkt. No. 37.

15

Dkt. No. 58.

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redesigned” and does not infringe on patents owned by SnapPower.16 They thus moved that
SnapPower be required to file an amended complaint removing the four patent infringement
claims, which occurred on February 3, 2017.17 SnapPower, however, reserved its right to amend
the complaint if after analyzing the samples it found support for any patent infringement
claims.18 SnapPower asserts it has recently learned the Ontel Defendants have begun to sell
Night Angel in “big box” stores such as Walgreens in various locations in Utah County. 19
Likewise, SnapPower asserts that Night Angel is also available for purchase through
www.buynightangel.com, and national retailers like Amazon and Target.20 Thus, SnapPower has
filed a motion for leave to amend to re-assert the removed patent claims on March 28, 2017.21
LEGAL STANDARD
The Ontel Defendants move to dismiss the pending complaint under Rule 12(b)(2) of the
Federal Rules of Civil Procedure. Where there has been no evidentiary hearing and the court
considers a motion to dismiss on the basis of affidavits and the complaint, the plaintiff merely
needs to “make a prima facie showing of personal jurisdiction.”22 In determining whether such a

16

Id.

17

See Dkt. No. 57.

18

Dkt. No. 76-1.

19

Dkt. No. 57 at ¶¶ 31-32.

20

Id. at ¶¶28-29, 33.

21

See Dkt. No. 70.

22

See Dudnikov v.Chalk & Vermillion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008).

4

showing exists, the court is to accept the allegations in the complaint as true and resolve all
factual disputes in the plaintiff’s favor.23
SnapPower moves to amend under Rule 15(a) of the Federal Rules of Civil Procedure.
Since SnapPower has already filed an amended pleading as a matter of course, it proceeds under
subsection (a)(2).
ANALYSIS
I.

PERSONAL JURISDICTION
Pursuant to Federal Rule of Civil Procedure 12(b)(1), “every defense to a claim for

relief” is to be presented by responsive pleading, except certain defenses, which may be asserted
by motion. Moreover, “Rule 12(h)(1) specifically states that the defense of lack of personal
jurisdiction is waived ‘if omitted from a motion in the circumstances described in [Rule
12(g)]’”24 “The requirement of personal jurisdiction is intended to protect a defendant’s liberty
interests, and because it represents an individual right, it can be waived.”25 “Rule 12 not only
contemplates the lodging of certain defenses at the earliest point in a lawsuit, it mandates a
waiver of those defenses if not presented at the first available opportunity.”26
Here, the Ontel Defendants appeared, though counsel, at the TRO hearing on December
1, 2016. Thereafter, the Ontel Defendants involved the court’s jurisdiction by filing a Stipulated
23

See Rambo v. Am. So. Ins. Co., 839 F.2d 1415, 1417 (10th Cir. 1988).

24

Travelers Cas. & Sur. Co. of Am. v. Unistar Fin. Serv. Corp., 35 Fed. Appx. 787, 789 (10th
Cir. 2002) (citing F.R.Civ.P. 12(h)).

25

Id. (citing Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702-03,
102 S.Ct. 2099 (1982).

26

Id. (citing U.S. v. 51 Pieces of Real Prop., 17 F.3d 1306, 1314 (10th Cir. 1994).

5

Preliminary Injunction Order on December 13, 2016, which was executed by the court the
following day. The Ontel Defendants did not raise or argue personal jurisdiction at either
appearance. Instead, they waited two months to file their motion to dismiss for lack of
jurisdiction.
The court finds the case of Wyrough & Loser v. Pelmor Laboratories, Inc. persuasive. In
that case the plaintiff filed a complaint requesting an injunction on February 14, and the
preliminary injunction hearing was commenced on February 25.27 The defendant then filed a
motion to dismiss for lack of personal jurisdiction three weeks later on March 18.28 The District
Court dismissed, finding the defendant had waived personal jurisdiction by participating in the
preliminary injunction hearing.29 The Third Circuit affirmed. It observed that “no continuance
was requested prior to the opening of the hearing;” “we can discern nothing in defendant’s
March 18th motion which could not have been presented earlier” and “we believe a hearing on an
application for an injunction pendente lite is a vital proceeding.”30 The Third Circuit concluded,
“a party who participates in [a preliminary injunction hearing] must be deemed to have waived
the defense of lack of personal jurisdiction.”31 The same result must be found in this case.

27

376 F.2d 543, 545 (3rd Cir. 1967).

28

Id.

29

Id. at 547.

30

Id.

31

Id.

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A Tenth Circuit district court reached the same conclusion in Marquest Med. Prods., Inc.
v. EMDE Corp.32 In that case, defendants objected to jurisdiction “only after having submitted
to an order of this court by their stipulation which restrains them from acting as was requested by
[plaintiffs] in its motion for preliminary injunction.”33 All of those same principles control in
this case. The Ontel Defendants were not diligent in challenging personal jurisdiction; they did
not raise it at their first defensive move. Accordingly, the court concludes the Ontel Defendants
have waived their defense of personal jurisdiction. Therefore, it is unnecessary to address the
merits of their motion to dismiss for personal jurisdiction, and the motion to dismiss is denied.
II.

MOTION TO AMEND
SnapPower contends that pursuant to Rule 15 of the Federal Rules of Civil Procedure,

courts “should freely give leave [to amend] when justice so requires.”34 “[T]he grant of leave to
amend the pleadings pursuant to Rule 15(a) is within the discretion of the trial court.”35 “The
purpose of the Rule is to provide litigants ‘the maximum opportunity for each claim to be
decided on the merits rather than on procedural niceties.’”36 The United States Supreme Court
explained:
In the absence of any apparent or declared reason such as undue delay, bad faith or
dilatory motive on the part of the movant, repeated failure to cure deficiencies by

32

496 F. Supp. 1242 (D. Colo. 1980).

33

Id. at 1245.

34

Dkt. No. 70 at 4.

35

Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006).

36

Id. (internal citations omitted).

7

amendments previously allowed, undue prejudice to the opposing party by virtue of
allowance of the amendment, futility of amendment, etc.-the leave sought should, as the
rules require, be ‘freely given.’37
Here, SnapPower’s motion is timely. At this juncture, no scheduling order has been
issued and no discovery has been conducted. Thus, no delay or prejudice will be caused by the
amendment. There is no basis to find that the amendment is being brought in bad faith. In fact,
SnapPower provided notice of the potential amendment months ago. SnapPower now seeks
leave to amend to assert claims for patent infringement and unfair competition after having the
opportunity to analyze the Ontel Defendants’ redesigned product it received in late January 2017.
The Ontel Defendants argue the amendment would be futile because SnapPower’s
patents are invalid, both under the prior art doctrine and because SnapPower is not the assignee
of Patents 588 and 900.38 In support of their position, they proffered the declarations of Dr. John
A. Palmer and Franklin M. Smith.39 To consider the proposed amendment to be futile based on
the declarations would require the court to consider the claim on the merits.
But “in resolving a motion to amend, when futility of amendment is argued, “[it] is ‘not
whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer
evidence to support the claims.’”40 “A futility objection should not turn into a mini-trial or
summary judgment proceeding, without the safeguards normally present for maturation and

37

Id.

38

Dkt. No. 74-3, Exhibits C-D.

39

Dkt. Nos. 74-2 and 74-3.

40

Home Design Servs., Inc. v. Bohnenkamp Const., Inc., No. 08-cv-02391-WDM-KMT, 2009
WL 2055176, *1 (D. Colo. July10, 2009).

8

merits-based resolution of claims.”41 Moreover, “[a] proposed amendment is futile if the
complaint, as amended, would be subject to dismissal.”42
At this juncture, considering the limited briefing on the validity of the patents, and
resolving any ambiguity in favor of SnapPower, the court concludes the issues raised by the
Ontel Defendants would be more appropriately addressed through a motion to dismiss or motion
for summary judgment. Thus, SnapPower is granted leave to amend its complaint, and the
parties should be allowed to litigate the issues on the merits.
CONCLUSION
IT IS THEREFORE ORDERED THAT the Ontel Defendants’ Motion to Dismiss is
DENIED and SnapPower’s Motion for Leave to Amend is GRANTED.
IT IS SO ORDERED.
DATED this 22nd day of May, 2017.
BY THE COURT:

_________________________
CLARK WADDOUPS
United States District Judge

41

Clearone Commc’n, Inc. v. Chiang, 2:07-cv-00037-TC, 2007 WL 2572380, *1 (D. Utah, Sept.
5, 2007).
42

Sanders v. Anoatubby, 631 Fed. Appx. 618, 623 (10th Cir. 2015) (proposed amendment
properly denied as futile where defendants were entitled to tribal sovereign immunity and
amendment did not cure that deficiency); see also DeHaan v. U.S., 3 Fed.Appx. 729, 730 (10th
Cir. 2001) (affirming dismissal of proposed constitutional tort claim against government
pursuant to sovereign immunity); and Gray v. Oracle Corp., 2:05-cv-534-TS, 2006 WL
2987941, *2 (D. Utah Oct. 17, 2006) (denying motion to amend as futile because plaintiff had
not exhausted administrative remedies for ADEA claims).
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