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California Expanded Metal Products Co. v. Klein

United States District Court, C.D. California

May 9, 2017

CALIFORNIA EXPANDED METAL PRODUCTS COMPANY, ET AL., Plaintiff,
v.
JAMES A. KLEIN, ET AL., Defendants.

          ORDER GRANTING PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION, IN PART [DKT. 54, 61]

          DEAN D. PREGERSON United States District Judge.

         Presently before the court is Plaintiffs' Motion for Preliminary Injunction. Having considered the submissions of the parties and heard oral argument, the court grants the motion in part, denies the motion in part, and adopts the following Order.

         I. Background

         Defendant James Klein (“Klein”) is the named inventor on several patents for building materials. (Complaint ¶ 9.) Klein assigned some of those patents to a company he helped form, Defendant Blazeframe Industries, Ltd. (“Blazeframe”). (Id. ¶ 10.) Klein, Blazeframe, and Plaintiffs California Expanded M Products Company (“CEMCO”) and ClarkWestern Dietrich Building Systems LLC (“Clark”) litigated several questions regarding the ownership, licensing, and alleged infringement of the patents in a prior case before this court. (Compl. ¶ 11.) See No. CV 12-10791-DDP(MRWx) (“the prior case”).

         The parties settled all claims in the prior case. (Compl. ¶ 12.) The transcript of a settlement conference constitutes the settlement agreement.[1] Plaintiffs allege that the settlement agreement required Blazeframe to assign the patents to CEMCO in consideration for an up-front payment. (Id. ¶ 16.) Blazeframe retained a royalty-free license to “commercialize the Patents in a restricted territory” spanning six states.” (Id. ¶¶ 16-17.) CEMCO also agreed to grant a license to Clark in exchange for royalty payments, a portion of which would be paid to Blazeframe. (Id.) The settlement transcript includes the following colloquy:

[CEMCO]: CEMCO shall grant Blazeframe the right to continue to sell under the Blazeframe patents in the territory of Washington, Alaska, Idaho, Montana and Wyoming. And that license shall be royalty free for the remaining life of the patents. . . .
[Clark]: The license to [Clark] is an exclusive license as to the Blazeframe patents but for the six states to Klein and Blazeframe; is that correct?
[CEMCO]: Correct. . . .
[Clark]: . . . And the limitations on MR. Klein -or on Blazeframe to the - six state region is that Blazeframe will only make no sales that will basically cross outside that six-state region. It will all - the sales and the delivery of the products will all be within that six-state region; is that correct?
[Blazeframe]: That's not my understanding. My understanding is that that's defined as it is in the current licensing agreement - the same agreements as exist now - same agreements as exist now - [Clark]: Well . . . But - but Klein - Blazeframe has some rights . . . to sell outside of the six-state region right now.
[CEMCO]: [I]f you'll recall, Mr. Klein specifically wanted to sell to dealers outside of this area. And we specifically said no to that and he came back and said that's okay. So he's aware of that. That was put on the table, and we didn't accept it and then [Blazeframe] agreed that it was off the table. So he had no dealers since those dealers are outside of this area; the sales are within the - these - this geographic region. That's his territory.
[Blazeframe]: See . . . . That's my understanding too that all sales have to be within the region.
[CEMCO]: Correct.
[Clark]: Okay. How did I say something different?
[Blazeframe]: I don't know. Maybe I wasn't - I - [Clark]: The sales are all with - confined within that six-state region. There can't be any sales by ...

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