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Spin Master, Ltd., et al v. Zobmondo Entertainment

August 22, 2011

SPIN MASTER, LTD., ET AL., PLAINTIFFS,
v.
ZOBMONDO ENTERTAINMENT, LLC, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Audrey B. Collins Chief United States District Judge

ORDER RE: MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION AS TO PLAINTIFFS JUSTIN HEIMBERG AND DAVID GOMBERG

Pending before the Court is Defendants Zobmondo Entertainment, LLC and Randall Horn's (collectively "Zobmondo's") motion for summary judgment, or, in the alternative, summary adjudication as to Plaintiffs Justin Heimberg ("Heimberg") and David Gomberg ("Gomberg"), filed on July 12, 2011. (Docket No. 320.) Plaintiffs Spin Master, Ltd. ("Spin Master"), Heimberg, and Gomberg (collectively "Plaintiffs") opposed on August 1, 2011*fn1 , and Zobmondo replied on August 8, 2011. The Court heard oral argument on August 22, 2011.

For the reasons below, the Court DENIES the motion brought by Zobmondo and, finding no disputed facts, sua sponte GRANTS summary judgment in favor of Plaintiffs.

BACKGROUND

The pending motion addresses only a single narrow issue: whether Heimberg and Gomberg have standing to remain plaintiffs in this trademark infringement case in light of transactions between their former company Falls Media, LLC and first Imagination International Corp. ("Imagination"), then Spin Master, involving the trademarks at issue. The facts relevant to that issue are undisputed.

When these consolidated suits were filed, Heimberg, Gomberg, and their wholly-owned company Falls Media owned the mark "Would You Rather . . .?," U.S. Trademark Reg. No. 2,970,830. In 2008, while this case was pending on appeal after the Court granted summary judgment to Zobmondo, Imagination acquired Falls Media by way of a contract entitled "Membership Interest Purchase And License Agreement" (the "Membership Agreement"). (Zobmondo's Amended Separate Statement of Undisputed Facts ("SUF") ¶ 1.) The Membership Agreement provided that, although Imagination would acquire Falls Media, Falls Media would retain title to the "Would You Rather . . .?" mark. (Conf. Gabriel Decl., Ex. A ¶ 1(d)(i).) With regard to this lawsuit, the agreement further indicated that the parties would:

(ii) Cause Imagination, through its ownership of Falls Media, to have all rights and obligations with respect to prosecuting and further enforcing and defending the Trademark Lawsuit and any appeals thereto and have Imagination pay the attorneys' fees and costs in connection with all further proceedings in the Trademark Lawsuit and indemnify Sellers [Heimberg and Gomberg] from all liabilities related to the Trademark Lawsuit.

(iv)[*fn2 ] Share the proceeds of the Trademark Lawsuit recovery, if any, after appeal of the Trademark Lawsuit trial court decision with such proceeds being divided between Sellers, on the one hand, and Falls Media (which shall be one hundred percent owned by Imagination), on the other hand, on the terms specified herein. (Id. ¶ 1(d)(ii), (iv).) The Membership Agreement also explained:

The Trademark Lawsuit relates to claims by Falls Media against Zobmondo with respect to trademark infringement, trademark dilution and unfair competition claims as well as Zobmondo's cancellation, trade dress and damages for fraudulent procurement counterclaims, all of which were resolved on summary judgment pursuant to the court's decision of June 11, 2008 against Falls Media. Falls Media desires to file an appeal with respect thereto ("Appeal"). . . . In the event that the Ninth Circuit Appeals Court remands the Trademark Lawsuit back to the District Court for trial ("New Trial"), Imagination shall determine in its sole discretion all matters with respect to the actions of Falls Media in connection with a New Trial[,] including without limitation whether to proceed with a New Trial, how much to expend in attorneys' fees, who shall act as attorneys for Falls Media in said New Trial, etc. Imagination shall also determine in its sole discretion the handling of all additional motions, lawsuits or other proceedings for or against Zobmondo or Randall Horn in connection with the protection of the Intellectual Property ("Further Trademark Enforcement"). For the avoidance of doubt, the parties hereto agree that Imagination shall direct and make decisions in connection with all matters related to the Appeal, any New Trial, any Further Trademark Litigation and Further Trademark Enforcement in its sole discretion, including without limitation whether to litigate, settle or otherwise resolve any of the foregoing as Imagination wishes. (Id. ¶ 3(b).) Finally, by way of this agreement, Imagination was obligated to pay Heimberg and Gomberg a royalty for use of the mark (id. ¶ 4), although Heimberg and Gomberg's company Seven Footer Entertainment LLC retained "a perpetual, exclusive, transferable, sublicensable, royalty free license throughout the world to use and exploit the Intellectual Property to create, publish, market, sell, distribute, advertise and promote books . . . electronic books, books on tape and other audio books, podcasts, comic strips and syndicated on line and print features (collectively 'Print Materials' and 'Print Rights')." (Id. ¶ 6.)

In August 2010, after this Court's summary judgment was reversed and the case remanded, Imagination sold the "Would You Rather . . . ?" trademark to Spin Master through an "Asset Purchase Agreement." (SUF ¶ 6.) In that agreement, Spin Master was to assume liability for "the continuation, prosecution, defense, settlement, or other disposition of the ["Would You Rather . . .?"] Litigation from and after the Closing Date." (Conf. Gabriel Decl., Ex. B ¶ 2.3(b).)*fn3 As part of this agreement, Heimberg, Gomberg, and their company Seven Footer entered into a "Royalty Agreement" with Spin Master (SUF ¶ 9), which contained the following provisions as relevant to conducing this litigation:

1. Background . . . (c) . . . As a result of the acquisition by Imagination of all of the membership interests in Falls Media, Imagination obtained control of all rights and obligations with respect to prosecuting and further enforcing and defending the Trademark Lawsuit and any appeals thereto and all attorneys' fees and costs in connection with all further proceedings in the Trademark Lawsuit.

(d) Pursuant to an Asset Purchase Agreement between Imagination, Falls Media, Spin Master and others even dated herewith (the "Asset Purchase Agreement"), Spin Master acquired from Imagination and Falls Media as vendors all right, title and interest in and to the Intellectual Property and all goodwill associated therewith[,] including the right to sue and recover damages or other relief for past, present or future infringement of the Intellectual Property. Pursuant to the Asset Purchase Agreement, Spin Master was required by Falls Media and Imagination to assume all rights and obligations with respect to the Trademark Lawsuit and any Further Trademark Litigation (as defined below) and all other rights, choses in action, benefits, and interests relating to the Intellectual Property and the Would You Rather products including to sue and recover damages or other relief for past, present and future infringement of the Intellectual Property (collectively, the "WYR Purchased Assets"). . . .

(e) As a condition of the completion of the transactions contemplated in the Asset Purchase Agreement and the transfer of the WYR Purchased Assets to Spin Master, the Inventors and Spin Master . . . have agreed to enter into this Royalty Agreement to:

(i) Share the after tax proceeds of the Trademark Lawsuit recovery, if any, with such after tax proceeds being divided between Inventors, on the one hand, and Spin Master, on ...


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