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IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRCT OF VIRGINIA
ALEXANDRIA DIVISION
__________________________________________
)
CURTIS A. EVANS and WHIPGOLF, LLC , )
)
Plaintiffs, )
)
v. ) C.A. No. 1:15-cv-000683
)
PLUSONE SPORTS, LLC, )
a Massachusetts limited liability company, )
and ALEX VAN ALEN, )
)
Defendants. )
__________________________________________)
MEMORANDUM IN SUPPORT OF
MOTION FOR PRELIMINARY INJUNCTION
Plaintiffs, Curtis A. Evans (Evans) and WhipGolf, LLC (WhipGolf), submit this
Memorandum in Support of their Motion for Preliminary Injunction against Defendants, PlusOne
Sports, LLC, (PlusOne) and Alex Van Alen (Van Alen).
INTRODUCTION
Plaintiffs seek to enforce a November 2, 2014, license agreement between the parties (the
Agreement) and have moved to enjoin Defendants from the improper manufacture, use, or sale
of licensed products. Unless enjoined, Defendants breaches of the Agreement and the misuse of
Evanss and WhipGolfs licensed device will continue. Defendants agreed that a breach of the
Agreement would constitute irreparable harm and the irreparable harm is further demonstrated
by the loss of Plaintiffs first-mover advantage.
2
FACTUAL BACKGROUND
Throw Golf
This case concerns the emerging sport of throw golf. See Exh. A, Declaration of Curtis
A. Evans, at 3. Throw golf provides an alternative to traditional golf by combining many of
the most popular elements of golf and lacrosse into a new and entertaining sport. Id. at 3.
While the game is played on traditional golf courses, and many of the basics of golf still apply,
participants play each hole with a single stick instead of up to 13 golf clubs. Id. at 3. Players
use a lacrosse-like throwing motion to advance a golf ball as if they were playing traditional golf.
Id. at 3. Instead of using a driver off the tee, irons in the fairway, or a wedge around greens,
players develop different techniques to shape their shots using various throwing motions. Id. at
3.
Once a player reaches the green, the side of the stick is used to push the ball towards
the hole much like a traditional golf putt. Id. at 4. Throw golf is used as a means to introduce
new players to golf, without the lifelong process of swing mastery, and can be played alongside
traditional golfers. Id. at 4. Golf courses throughout the country have begun to embrace this
sport as a way to attract an entirely new generation of patrons to their businesses and to the
greater game of golf. Id. at 4.
The Parties
Evans invented an apparatus for throwing a golf ball a long distance. Id. at 5. On
February 28, 2012, Evans filed a provisional patent application with the United States Patent &
Trademark Office (USPTO), No. 61604176, for Projectile and throwing apparatus and game
for projectile throwing. Id. at 6. On February 27, 2013, Evans filed U.S. Patent Application
13/779,676, claiming priority to the provisional application. Id. at 7. The Evans Application
3
published on May 29, 2014 as U.S. 2014/0144417. Id. at 7. Evans is the sole member and
manager of WhipGolf. Id. at 1.
Van Alen is the sole member of PlusOne, which filed its own patent application for the
subject of Evanss application. Id. at 8. PlusOnes application was rejected by the USPTO in
light of Evanss application. Id. at 9. After discovering the Evans Application, PlusOnes
counsel contacted Evans and advised that PlusOne was preparing to sell a product that practiced
at least one invention disclosed in Evanss application. Id. at 10. PlusOne expressed interest in
licensing Evanss application and any resulting patents. Id. at 11.
The Agreement
Evans reluctantly agreed to discuss a license of his technology with PlusOne if the parties
could agree upon certain business terms. Id. at 11. While Evans had trepidation about
licensing to an unknown start-up company in the sporting goods industry, and desired guaranteed
royalty payments, discussions still progressed between the parties. Id. at 12. PlusOnes initial
license proposal, sent on August 14, 2014, requested an exclusive license, with a right to
sublicense, in exchange for payment of royalties. Id. at 13. Evans rejected this initial proposal,
but the parties continued negotiations over several months and PlusOne eventually agreed to
accept a non-exclusive license and guarantee royalty payments to Evans. Id. at 14.
On November 2, 2014, the parties executed the Agreement. Id. at 15. A copy is
attached as Sealed Exhibit 1. Id. at 16. Van Alen executed the Agreement as CEO of PlusOne
and personally guaranteed PlusOnes performance. Id. at 17.
Among the promises contained in the Agreement is a provision for the payment of
royalties based upon the gross sales of products practicing the licensed inventions. Id. at 19.
Royalty payments are required to be paid quarterly, and are to be received no later than 30 days
4
after the close of each quarter. Id. at 20. Delinquent payments remaining uncured for at least
10 business days from the date of notice of the delinquency allow Evans to terminate the license
and invoke an acceleration clause. Id. at 21. The acceleration clause permits Evans to declare
future annual minimum royalty payments immediately due and also permits him to terminate the
license for PlusOne to make, use or sell any licensed product. Id. at 22.
Most importantly, however, is the parties agreement that delinquent payment
constitutes irreparable harm. Id. at 23. The parties agreed that Delinquent payment,
uncured 10 business days from due date, presents irreparable harm to Licensor and parties agree
to remedy in equity allowing Licensor to enjoin any further manufacture, use, or sale. Id. at
23. That was not only a contractual agreement, but the recognition of that fact that the first party
to market with this novel technology would permanently enjoy a first-mover advantage that
would be impossible to replicate. Id. at 24.
For example, the parties discussed during negotiations that the first mover would garner
substantial goodwill among the golfing community, golf course owners associations and
facilities owners, equipment retailers and wholesalers, and investors. Id. at 25. The Agreement
was executed only after PlusOne agreed to include a guaranteed royalty and to being excluded
from the market if it failed to make the guaranteed payment. Id. at 26.
An early draft of the Agreement contained a choice-of-law provision calling for the
application of Virginia law. Id. at 27. However, the parties modified that term in the executed
version of the Agreement to call for the application of Delaware law. Id. at 28. This change
was intentional. Id. at 29. In fact, the change to Delaware law was suggested by PlusOnes
counsel to make the Agreement binding, even though the parties contemplated the execution of a
more comprehensive agreement at a later date. Id. at 29, 30.
5
License Agreement Negotiations
The Agreement (which is entitled Term Sheet) contains all the material terms necessary
to constitute a binding and enforceable contract. Id. at 33. It contains a royalty rate and a
formula for calculating the rate. Id. at 33. It contains payment terms, the right to audit records,
and an acceleration provision. Id. at 33. It contains a detailed license grant exclusion and a
covenant not to sue from PlusOne to Evans. Id. at 33. It has detailed due diligence, marking
and assignment provisions. Id. at 33. It contains a provision concerning confidentiality and
choice of law. Id. at 33.
The Agreement required the parties to work in good faith to execute a more
comprehensive and equally binding Agreement that would be entitled Non-Exclusive License
Agreement. Id. at 31. Evans sought to comply with this term by drafting a more
comprehensive agreement and forwarding it to PlusOne on November 4, 2014. Id. at 32.
PlusOne responded with a heavily redlined draft that changed material terms. Id. at 34. Evans
agreed to some of the suggested language, but rejected PlusOnes changes that were inconsistent
with the Agreement. Id. at 35. Despite Evanss good faith efforts on a number of occasions,
including through counsel, to execute a more comprehensive Non-Exclusive License Agreement
with PlusOne, PlusOne terminated negotiations in January, 2015, just before the industrys
biggest trade show. Id. at 36.
PlusOnes Breach
On January 1, 2015, Evans emailed PlusOne to remind it that the first guaranteed annual
minimum royalty payment of $10,000 was due on January 5, 2015. Id. at 7. Van Alen sent an
e-mailed response to Evans informing him that PlusOne would not make any payment. Id. at
38. On January 6, 2015, Evans notified PlusOne that it was delinquent in its payment of the
6
guaranteed annual minimum royalty payment set forth in the Agreement. Id. at 39. PlusOne
failed to cure this deficiency within the allotted ten days after notice. Id. at 39. On March 6,
2015, Evans, through counsel, sent formal notice of default to PlusOne, invoking the
Agreements acceleration clause, demanding immediate payment, and suspending PlusOnes
right to make, use, or sell any Licensed Product. Id. at 40.
Despite the demand for payment, PlusOne has failed to make any payments due under the
Agreement. Id. at 41. PlusOne has also continued to make, use, and sell Licensed Product in
defiance of Evanss suspension of PlusOnes right to make, use, and sell the Licensed Product.
Id. at 42.
Van Alen has indicated that PlusOne possesses approximately 5,000 units of Licensed
Product in its inventory, despite the suspension of its license to make, use, and sell such
inventory, and that it planned to make and/or sell 24,000 units for 2015 and 120,000 units for
2016. Id. at 43. Because Van Alen and PlusOne continue to market and sell such inventory,
Evans and WhipGolf are being irreparably injured by PlusOnes unlawful market position as a
first-mover in this industry every day. Id. at 44.
Trademark Misuse
PlusOne is presently selling product and conducting advertising that contains the circle-R
() symbol for a federal trademark registration when no such federal trademark registration
exists. Id. at 45. There is a compelling public interest in preventing PlusOne from falsely
marking its product and marketing material with the circle-R symbol. PlusOne is presently mis-
using the circle-R symbol adjacent the marks FLINGGOLF and FLINGSTICK, and it has
been doing so improperly since December, 2014 when it abandoned federal registration of those
marks for use with certain goods. Id. at 46.
7
If PlusOne continues to sell inventory containing a circle-R symbol adjacent the mark
FLINGSTICK, the public would be misled into believing that PlusOne has secured a federal
trademark registration when exactly the opposite is true PlusOne abandoned the mark in
December, 2014. Id. at 47-48.
PROCEDURAL HISTORY
Plaintiffs filed their Complaint on May 29, 2015. The Complaint was served on June 20,
2015. On June 5, 2015, Plaintiffs sent Defendants a letter advising them that they had until June
26, 2015 to resolve this matter or Plaintiffs would move for preliminary injunctive relief.
Defendants did not respond to that demand and instead filed a motion to dismiss. Plaintiffs have
timed the filing of this motion so that it will be heard on the same day and at the same time as the
motion to dismiss.
ARGUMENT
This case concerns a signed Agreement between two sophisticated parties. Defendants
breached that Agreement. An uncured payment default is a material breach and, pursuant to the
express terms of the Agreement, constitutes irreparable harm. Even without the contractual
agreement concerning the existence of irreparable harm, the existence of such harm cannot
seriously be contested. The first to market in this fledgling market will forever enjoy a first-
mover advantage that will be impossible to duplicate. The monetary value of that advantage will
be equally impossible to calculate. Because Plaintiffs will be able to show that they are
substantially likely to succeed on the merits, that they will be irreparably harmed if Defendants
are not enjoined, and that all of the other factors weigh in favor of an injunction, this Motion
should be granted.
8
I. STANDARD FOR A PRELIMINARY INJUNCTION
A preliminary injunction is an extraordinary remedy, and the issuance or denial of such a
remedy is a decision within the discretion of the district court. The Real Truth About Obama,
Inc. v. Federal Election Comn, 575 F.3d 342, 346 (4th Cir. 2009). To succeed, a plaintiff
must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer
irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his
favor, and [4] that an injunction is in the public interest. Winter v. Natural Resources Defense
Counsel, Inc., 555 U.S. 7, 20 (2008); The Real Truth About Obama, 575 F.3d at 346; ForceX,
Inc. v. Technology Fusion, LLC, 2011 WL 2560110, at *4 (E.D. Va. June 27, 2011).
II. EVANS AND WHIPGOLF ARE LIKELY TO SUCCEED ON THE MERITS
Defendants failure to make their first guaranteed annual minimum royalty payment of
$10,000 on January 5, 2015, and their subsequent failure to cure their breach within 10 business
days of the January 6, 2015 delinquency notice, is an unquestionable default. The Agreements
acceleration clause permits Evans to accelerate guaranteed royalties and to terminate the license
to make, use, or sell the licensed product upon default. Thus, in analyzing Plaintiffs likelihood
of success on the merits, the only issue is whether the Agreement is a valid and enforceable
contract. The Court should find that Plaintiffs are likely to succeed on the merits because the
Agreement is valid and enforceable and it has been undeniably breached by PlusOne.
A. Choice of Law
This case presents the question of what law to apply to a breach of contract claim when
the parties dispute whether an enforceable contract even exists. The Agreement, which was
signed by sophisticated parties, each represented by counsel, contains a choice-of-law provision
stating that Delaware law should apply. Virginia courts, however, have held that the automatic
9
application of such a provision impermissibly assumes that an enforceable agreement exists,
which is the question before the Court. Thomaz v. Its My Party, Inc., No. 1:13-cv-00009-JCC-
TRJ, 2013 WL 1450803, at *4 (E.D. Va. Apr. 9, 2013) (Cacheris, J.), affd, 548 F. Appx 893
(4th Cir. 2013).
1. The Validity, Interpretation or Construction of a Disputed Contract
Is Governed by the Place of Contracting
In Virginia, . . . the validity, interpretation, or construction of a contract is governed by
the substantive law of the lex loci contractusthe place of contracting. O'Ryan v. Dehle Mfg.
Co., 99 F. Supp. 2d 714, 718 (E.D. Va. 2000); Best Medical Intl v. Tata Elxsi Ltd., No. 1:10-cv-
01273, 2011 WL 5843627 at *4 (E.D. Va. 2011) (Davis, J.). [T]he place of contracting is
determined by the place where the last act necessary for a binding contract took place.
Thomaz, 2013 WL 1450803, at *5 (quoting Western Branch Holding Co. v. Trans Marketing
Houston, 722 F. Supp. 1339, 1341 (E.D. Va. 1989)).
The parties negotiated the Agreement over a series of months. See, Exh. A. at 14. On
November 2, 2014, Evans (who was in Virginia) placed his electronic signature upon the Term
Sheet and sent the executed version to Van Alen (who was in Massachusetts) for his signature.
Id. at 18. Van Alen then accepted by countersigning on behalf of PlusOne later on November
2, 2014 in Massachusetts. Id. at 18. Thus, the last act necessary to create a binding contract
Van Alens signature took place in Massachusetts. As demonstrated below, the Agreement is
plainly valid and enforceable under Massachusetts law.
10
2. If the Contract Is to be Performed in a Place Other than the Place of
Contracting, Then the Law of the Place of Performance Controls
Virginia recognizes an exception to lex loci contractus. In situations where the contract
is to be performed in a place other than that dictated by the application of lex loci contractus,
then the law of the place of performance governs. Thomaz, 2013 WL 1450803 at *5; see also
Equitable Trust Co. v. Bratwursthaus Management Corp., 514 F.2d 565, 567 (4th Cir. 1975). A
contract breach is a performance issue and, thus, is regulated by the law of the place of
performance. Thomaz, 2013 WL 1450803 at *5.
Courts in this jurisdiction have considered the place of performance to be where the
majority of the services are to be performed. Best Medical, 2011 WL 5843627 at *4; see also J.
David Conti, Inc. v. Stokes Equip. Co., No. 3:94cv15, 1994 U.S. Dist. LEXIS 16926 at *20 (E.D.
Va. Sept. 16, 1994) (Virginia was place of performance where the majority of the manufacturing
and testing of the product was to take place in Virginia). In Best Medical, an Indian software
contractor performed virtually all of its services in India and then uploaded the completed code
to Pennsylvania for its customer to assess. Based on those facts, this Court concluded that India
was the place of performance.
This case is like Best Medical. The only obligation on Evans, as the licensor, is to grant
the license, refrain from granting other licenses, and then accept royalty payments. By contrast,
PlusOne is obligated, per the Due Diligence provision on page 2 of the Agreement, to diligently
proceed with the development, manufacture, and sale of the Licensed Products, and PlusOne will
earnestly and diligently market the same after execution of this Agreement and in quantities
sufficient to meet the market demands therefore. Thus, the overwhelming majority of services
11
to be performed under the Agreement are to be performed by PlusOne and those services are to
be performed either in Massachusetts or in other states.
There does not appear to be a Virginia case concerning the place of performance of a
license agreement for choice-of-law purposes. In fact, there is a paucity of authority on that
issue across the United States. The Northern District of Illinois has, however, examined this
precise issue and determined that the place of performance for a licensing agreement is the place
where licensed products were manufactured and used in commerce. Fischer Industries, Inc. v.
Medivance Instruments, Ltd., No. 89-c-9082, 1992 WL 686866, at *10, n.8 (N.D. Ill. Aug. 31,
1992).
In Fischer, the English licensor sought to apply English law to a dispute concerning a
licensing agreement. The Illinois-based licensee argued that the subject licensed products were
manufactured in Illinois. The court held that the place of performance of the license agreement
was Illinois because the licensed products were manufactured there. Id. This rule is also
consistent with Virginia law concerning sales contracts. In Virginia, [t]he place of performance
of a sales contract is usually considered to be the place where goods are delivered. Madaus v.
November Hill Farm, Inc., 630 F. Supp. 1246, 1248 (W.D. Va. 1986). Thus, the place of
performance for the Agreement should be deemed to be Massachusetts and Massachusetts law
should apply to contract validity, construction and enforceability issues.
3. If the Place of Performance Is in Multiple Jurisdictions, Then the Law
of the State in Which the Contract Was Made Applies
In Virginia, there is an exception to the exception in cases where the place of
performance cannot definitively be determined or it is determined to be in more than one state.
East West, LLC v. Rahman, 873 F. Supp. 2d 721, 728 (E.D. Va. 2012) (Cacheris, J.).
12
Importantly, an exception exists when the contract is to be performed more or less equally
among two or more states, in which case the law of the state in which the contract was made
should apply. Id. (citing Roberts v. Aetna Casualty & Sur. Co., 687 F. Supp. 239, 241 (W.D.
Va. 1988); Black v. Powers, 48 Va. App. 113, 13233, 628 S.E.2d 546 (Va. Ct. App. 2006)).
In the context of a license agreement, there is no credible argument that such an
agreement is performed entirely in the home state of the licensor. At most, a license agreement
is an agreement in which some part of the performance occurs in the licensors jurisdiction and
the overwhelming majority of the rest occurs either where the licensee, who is manufacturing
and selling the licensed products, is operating or in multiple jurisdictions. Under the exception
to the exception rule, Virginia courts revert to the place of contracting, which here dictates the
application of Massachusetts law. See, e.g., The Chesapeake Supply and Equipment Co. v. J.I.
Case Co., 700 F. Supp. 1415, 1418 FN 10 (E.D. Va. Nov. 23, 1988) (Ellis, J.) (finding agreement
performed in Maryland, as well as in Virginia and Delaware); accord John Deere Const.
Equipment Co. v. Wright Equipment Co., Inc., 118 F. Supp.2d 689, 693 (W.D. Va. Oct. 3, 2000)
(agreement performed in four other states besides Virginia).
4. Virginia Respects Choice-of-Law Provisions in Contracts
While, as a general rule, the validity of a contract in Virginia is determined under the law
where the contract was made, Virginia law looks favorably upon choice of law clauses in a
contract, giving them full effect except in unusual circumstances. Colgan Air, Inc. v. Raytheon
Aircraft Co., 507 F.3d 270, 275 (4th Cir. 2007); see also M/S Bremen v. Zapata OffShore Co.,
407 U.S. 1, 10 (1972) (forum selection clauses are presumed valid unless unreasonable); accord
Tate v. Hain, 181 Va. 402, 410, 25 S.E.2d 321 (1943). Courts in this jurisdiction honor the
choice-of-law provision in a contract at issue unless (a) it is unfair or unreasonable, or affected
13
by fraud or unequal bargaining power, or (b) there is some indication that the parties did not
clearly intend for the designated law to govern the terms of the contract. Edwards Moving &
Rigging, Inc. v. W.O. Grubb Steel Erection, Inc., No. 3:12-cv-146-HEH, 2012 WL 1415632, at
*3 (E.D. Va. Apr. 23, 2012).1
Plaintiffs appreciate the concern that enforcing a choice-of-law provision in a contract
that is argued to be invalid or unenforceable somewhat puts the cart before the horse. Here,
however, there is a signed document, executed by sophisticated parties represented by counsel,
containing many detailed provisions including choice of law. By affixing their signatures to the
document, they agreed to something.
The Agreement was the result of a contract between parties with equal bargaining
power. For these reasons, this Court could also determine that Delaware law controls the issue
of whether the Agreement is enforceable. As will be shown below, an analysis of the Agreement
under Delaware law will conclude that the Agreement is binding and enforceable.
To be clear, Plaintiffs believe that the validity and enforceability of the Agreement should
be examined under Massachusetts law. However, regardless of whether Massachusetts,
Delaware or even Virginia law is applied, the result will be the same. The Agreement is
enforceable.
B. The Agreement Is Enforceable Under Massachusetts Law
Massachusetts law provides that if the parties have agreed upon all material terms, it
may be inferred that the purpose of a final document which the parties agree to execute [in the
future] is to serve as a polished memorandum of an already binding contract. Goren v. Royal
1 These two lines of cases cannot be easily reconciled. In Edwards Moving, for example, Judge Hudson
expressed no reservations about enforcing a choice of law provision in a contract that was argued to be
unenforceable and contrary to Virginia public policy.
14
Investments Inc., 25 Mass. App. Ct. 137, 140, 516 N.E.2d 173, 175 (Mass. App. 1987); accord
America's Growth Capital, LLC v. PFIP, LLC, No. 12-cv-12088, 2014 WL 7330757, at *16 (D.
Mass. Dec. 19, 2014) (When a preliminary agreement incorporates all of the material terms of a
contract, and the execution of the final instrument is a mere formality, a binding contract is
formed). While [t]here is commercial utility to allowing persons to hug before they marry,
Massachusetts law requires parties to explicitly state that they do not intend to be bound by
an otherwise valid preliminary agreement. Goren, 515 N.E.2d at 176-77 (A proviso of that
sort should speak plainly, e.g., The purpose of this document is to memorialize certain business
points. The parties mutually acknowledge that their agreement is qualified and that they,
therefore, contemplate the drafting and execution of a more detailed agreement. They intend to
be bound only by the execution of such an agreement and not by this preliminary document.).
The District of Massachusetts applied this reasoning to validate a disputed agreement in
Video Central, Inc. v. Data Translation, Inc., 925 F. Supp. 867, 870 (D. Mass. 1996). As the
parties had both signed a letter of intent that included all essential terms, including the rights
granted by the instrument, the duration of the agreement, the price of the units to be distributed,
the geographic limits of the distributorship, the minimum volume of sales required to maintain
exclusive distributorship rights, the court determined that the letter of intent was sufficiently
detailed such that the transaction [could], if necessary and finally determined to be appropriate,
be consummated solely on the basis of the [letter]. Id. at 870 (quoting RandWhitney
Packaging Corp. v. Robertson Group, 651 F. Supp. 520, 534 (D. Mass. 1986)).
The court distinguished the letter of intent from a case where there was a mere agreement
to purchase goods in the future and agree upon terms in detail at that time. Id. at 870. In finding
the letter of intent potentially valid, the court also accorded significant weight to the parties
15
failure to provide a disclaimer that they did not yet intend to be bound as in Goren. Id. at 872
(quoting Goren, 516 N.E.2d at 176-77).
Like the disputed contracts in Goren and Video Central, the Agreement details all
essential and material terms. It expressly describes the technology involved and the geographic
scope of the license both for manufacture and sales. The exclusive and non-exclusive nature of
the license rights are defined therein, as are the rights to grant sublicenses, the nature of licensed
products, and the parties usage of certain marks. Perhaps most importantly, the Agreement
defines in great detail the calculation of royalties, the due dates of royalty payments, and the
consequences for the parties in the event of default.
As set forth in Video Central, the transaction [could], if necessary and finally
determined to be appropriate, be consummated solely on the basis of the [letter]. Video Central,
925 F. Supp. at 870. Moreover, while the parties painstakingly negotiated material terms over a
period of months, they entirely and purposely failed to include the type of plain disclaimer
stating that the agreement did not intend to create legally binding obligations as required by
Massachusetts law. Under Massachusetts law, Plaintiffs are likely to succeed in obtaining a
determination that the Agreement is a valid contract, and are thus likely to succeed on the merits.
C. The Agreement Is Enforceable Under Delaware Law
If the Court respects the parties choice-of-law agreement, the Agreement is enforceable
under Delaware law. In Delaware, an enforceable contract exists when (1) the parties intended
that the contract would bind them, (2) the terms of the contract are sufficiently definite, and (3)
the parties exchange legal consideration. Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158
(Del. 2010). The Agreement satisfies each of these requirements.
16
[I]t is hornbook law that one who accepts a written contract, either by signing or by
other means, will normally be bound by its terms . . . . In re Abingdon Realty Corp., 18 B.R.
571, 573 (E.D. Va. 1982). Whether the parties intended to be bound may be inferred, in large
part, by their actions. For example, in Osborn, the court explained that the face of [a] contract
manifests the parties intent to bind one another contractually. 991 A.2d at 1158-59. By virtue
of the parties signature upon the contract, the Osborn court determined that they plainly
intended to be bound by it. Id. at 1158-59. Similarly, here, the Agreement was indisputably
signed by the parties. Thus, like in Osborn, this Court should determine that the parties intended
to be bound. Similarly, as in Osborn, there can be no serious argument that consideration has
not passed between the parties. Id. at 1158-59.
Delaware adheres to the objective theory of contracts, i.e. a contracts construction
should be that which would be understood by an objective, reasonable third party. Id. at
1159. Delaware law requires that a court read a contract as a whole and [ ] give each provision
and term effect, so as not to render any part of the contract mere surplusage. Id. at 1159. [A]
contract must contain all material terms in order to be enforceable. Id. at 1159.
Here, the Agreement creates an unambiguous contract for PlusOne to license the right to
use Evanss intellectual property in exchange for payment of carefully defined royalties. See id.
at 1160 (This contracts only reasonable interpretation creates an installment contract with an
option to purchase at the end of the term.). The parties agreed to the scope of the license to use
Evanss intellectual property, the exclusivity, the amount of royalties, and the damages available
in the event of a partys breach. The first page refers to a license agreement and indicates that
the parties characterized it as Version: 3.6-Final. The terms of this contract are succinctly
stated, unambiguous, and definite.
17
Even if the Court finds that the Agreement is an agreement to agree upon a future terms,
such an agreement is still enforceable under Delaware law so long as it contains the essential
terms to form a contract. Parties may make agreements to make a contract and such agreements
will be enforced if they specify all of the material and essential terms including those to be
incorporated in the future contract. Vale v. Atl. Coast & Inland Corp., 99 A.2d 396, 399 (Del.
Ch. 1953) (still the leading and most cited case on this issue). Thus, Delaware law is the same as
Massachusetts law on this issue.
D. The Agreement Is Enforceable Under Virginia Law
While Massachusetts and Delaware law clearly favor a finding that the parties
Agreement is valid and enforceable, the application of Virginia law likely would result in the
same finding. This is because the Agreement is not merely a commitment to reach a future
contractual objective (agreement to agree), but is instead a fully binding preliminary agreement.
In Thomaz, this Court examined the validity of a contract in which an election was made
for New York law to apply. Thomaz, 2013 WL 1450803, at *4. When comparing the law of
New York and Virginia regarding contract validity, the Court explained that it was unable to
discern any meaningful difference between New York and Virginia law on this issue. Id. at *5.
While the Court went on to apply Virginia law to the dispute at issue, it made clear that New
York and Virginia law of contract validity do not differ appreciably. Id. at *5.
This comparison provides helpful guidance in light of the Fourth Circuits adoption of
Judge Levals widely-cited decision, Teachers Insurance and Annuity Assoc. of America v.
Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987), to recognize the importance of enforcing and
preserving agreements that were intended as binding, despite a need for further documentation or
further negotiation in the future. Burbach Broad. Co. of Delaware v. Elkins Radio Corp., 278
18
F.3d 401, 407 (4th Cir. 2002). In Burbach, the Fourth Circuit applied Judge Levals distinction
between Type I and Type II preliminary agreements under New York law to a contract
validity dispute arising under West Virginia law. Id. at 407. Given the Thomaz courts
observations about the similarities between New York and Virginia law on this issue, this
analysis applies with equal force to Virginia law. Thomaz, 2013 WL 1450803, at *5.
A Type I agreement is often referred to as a fully binding preliminary agreement.
Burbach, 278 F.3d at 407. This type of preliminary agreement occurs when parties have
reached a complete agreement (including the agreement to be bound) on all issues perceived to
require negotiation. Id. at 407 (citing Teachers Insurance, 670 F. Supp. at 498). Such an
agreement is preliminary only in form-only in the sense that the parties desire a more elaborate
formalization of the agreement. Id. at 407 (citing Teachers Insurance, 670 F. Supp. at 498).
The second stage is not necessary; it is merely considered desirable. Id. at 407 (quoting
Teachers Insurance, 670 F. Supp. at 498).
By contrast, a Type II agreement is often referred to as a binding preliminary
commitment. Id. at 407 (quoting Teachers Insurance, 670 F. Supp. at 498). While Type I
agreements bind parties to their ultimate contractual objective in recognition that a contract was
reached, despite the anticipation of further formalities, Type II agreements do not commit the
parties to their ultimate contractual objective. Id. at 407 (citing Teachers Insurance, 670 F. Supp.
at 498). Rather, they commit the parties to negotiate the open issues in good faith in an attempt
to reach the contractual objective within the agreed framework. Id. at 407 (citing Teachers
Insurance, 670 F. Supp. at 498). The parties assume a duty to negotiate in good faith, and are
barred from renouncing the deal, abandoning the negotiations, or insisting on conditions that do
19
not conform to the preliminary agreement. Id. at 407 (citing Teachers Insurance, 670 F. Supp. at
498).
Regardless of an agreements title, Type I and Type II preliminary agreements are both
binding and enforceable. Id. at 407. The parties Agreement is clearly a Type I agreement. As
the Fourth Circuit explained, a Type I agreement is characterized by certain circumstances:
1) whether there has been an express reservation of the right not to
be bound in the absence of a writing, 2) whether there has been
partial performance of the contract, 3) whether all of the terms of
the alleged contract have been agreed upon, and 4) whether the
agreement at issue is the type of contract that is usually committed
to writing.
Id. at 408 (quoting Adjustrite Systems, Inc. v. GAB Business Services, Inc., 145 F.3d 543, 549 (2d
Cir. 1998); see also Restatement (Second) of Contracts 27 cmt. c (1981).
The parties made no reservation of the right to not be bound in their Agreement. Further,
partial performance has occurred because Van Alen and PlusOne began producing units of
licensed product and selling such units to the public pursuant to their due diligence obligation.
The Agreement states that it is Version: 3.6-Final and demonstrates its finality by providing
detailed explanations of all agreed-upon terms. These circumstances demonstrate that the
parties Agreement is, in fact, a Type I agreement and, therefore, is both binding and enforceable
under Virginia law.
III. IF PLUSONE IS NOT ENJOINED, PLAINTIFFS WILL SUFFER
IRREPARABLE INJURY
Evans invented the devices described in his patent application, which was first filed on
February 28, 2012. PlusOnes applications were rejected in light of Evanss application. That
forced PlusOne to pursue a license from Evans.
20
PlusOne and Van Alen agreed that their product infringes a Valid Claim (the definition of
which includes claims in pending patent applications that have not yet issued), and they promised
a guaranteed royalty because of that acknowledgment of not being first to invent. The parties also
agreed that Evans could notify the public that he had granted PlusOne a non-exclusive license
(and necessarily that PlusOne would acknowledge it had taken a non-exclusive license), providing
credibility and goodwill to Evans in the marketplace as the first to invent the product for throw
golf. See, Exh A at 49.
Plaintiffs have suffered and will continue to suffer irreparable harm if Defendants are not
enjoined. Id. at 50. Plaintiffs delayed manufacturing their own product and did not participate
in the PGA Merchandising Show in late January, 2015 in reliance upon the promises and
representations contained in the Agreement. Id. at 50. In delaying formal entry into the market,
and failing to participate in the leading industry trade show, Plaintiffs missed their chance to
garner substantial recognition and goodwill for introducing a new and innovative product into the
golf market. Id. at 51. PlusOne unilaterally terminated discussions with Plaintiffs on the eve of
this show, which left insufficient time for Plaintiffs to obtain a booth and exhibit their product at
the most important show of the year. Id. at 52.
Defendants expressly acknowledged that any uncured delinquent payment will cause
Evans to suffer irreparable harm. (Delinquent payment, uncured 10 business days from due date,
presents irreparable harm to Licensor and parties agree to remedy in equity allowing Licensor to
enjoin any further manufacture, use, or sale.). Such an acknowledgement is a highly important,
though not conclusive, factor in establishing whether irreparable harm exists. Dominion Video
Satellite, Inc. v. Echostar Sat. Corp., 356 F.3d 1256, 1266 (10th Cir. 2004) (collecting and
summarizing cases).
21
Both the Fourth Circuit and this Court have consistently held that [w]hen the failure to
grant preliminary relief creates the possibility of permanent loss of customers to a competitor or
the loss of goodwill, [such as here,] the irreparable injury prong is satisfied. Fred Hutchinson
Cancer Research Ctr. v. BioPet Vet Lab, Inc., No. 2:10-cv-616, 2011 WL 1119565, at *5 (E.D.
Va. Mar. 1, 2011); see also Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bradley, 756 F.2d
1048, 1055 (4th Cir. 1985) (holding that possibility of permanent loss of customers to competitor
or possible loss of goodwill satisfies irreparable harm prong of an injunction analysis).
Given Defendants continued marketing and sales of inventory practicing licensed
inventions, despite the suspension of the license, the likelihood of permanent loss of customers to
a competitor and the loss of goodwill exists and the magnitude of the loss will be impossible to
quantify.
More importantly, Defendants improperly positioned themselves as the first-mover in this
emerging industry by unlawfully commercializing Plaintiffs intellectual property. That
advantage, once lost, can never be recovered. Thus, Evans and WhipGolf have established that
they will suffer irreparable harm. Rimlinger v. Shenyang 245 Factory, No. 2:13-CV-2051, 2014
WL 2527147, at *6 (D. Nev. June 4, 2014) (loss of market share or first mover advantage may
lead to relief especially where the movant demonstrates that it operates in a market with only
one or several competitors).
Continued firsts for PlusOne would usurp Evanss goodwill as the creator of the
technology, as the product is first introduced to new golf courses by PlusOne rather than Evans,
to new players, to owners of groups of golf courses who may buy large numbers of sticks at
once, to tournament organizers, to tradeshows, to players leagues, to golf driving ranges, to
golf-related magazines and websites, to golf-related television and radio programming, to golf
22
professionals, to celebrities, to charitable organizations, and to disabled athletes. PlusOne should
not be allowed an undeserved list of firsts, which can never be replicated or quantified, when it
agreed to cease manufacturing and sales if it missed guaranteed royalty payments.
Moreover, potential new market entrants should have seen a market of two competitors,
with Evans having licensed PlusOne. The existence of a license alone provides market goodwill
and credibility for Evans. Without it, Evans is harmed irreparably, with the market perceiving a
vastly different landscape with PlusOne as the first-mover and frontrunner, rather than Evans.
This disparity in goodwill cannot be monetarily calculated in this young and rapidly growing
market. New market entrants, having seen PlusOne take a license, would be more inclined to
investigate the necessity of taking a license from Evans, too, before entering the market.
Continued PlusOne sales outside the terms of the Agreement, in a market of two participants
PlusOne and WhipGolf irreparably harms Evans.
IV. THE BALANCE OF THE EQUITIES TIPS DECIDEDLY IN FAVOR OF EVANS
AND WHIPGOLF
In determining whether to grant a preliminary injunction, a court must balance the
competing claims of injury and must consider the effect on each party of the granting or
withholding of the requested relief. Winter, 555 U.S. at 376. The relief sought simply would
enjoin wrongful actions and return the parties to the status quo before Defendants breached the
Agreement. The requested injunction merely obligates Defendants to comply with the
Agreement by abiding by the termination of their permission to make, use, or sell the licensed
products. Atlantic Diving Supply, Inc. v. Moses, No. 2:14-cv-380, 2014 WL 3783343, at *12
(E.D. Va. July 31, 2014) (holding that the balance of the equities weighed in favor of plaintiff
23
where the requested injunction merely require[d] [d]efendant to do what he [was] otherwise
obligated to do pursuant to the [a]greement).
By contrast, Evans and WhipGolf will continue to suffer irreparable harm if an injunction
is not issued and Defendants are allowed to continue to manufacture, use, and sell the licensed
products. As previously described, Van Alen has indicated that PlusOne possesses
approximately 5,000 units of licensed products in its inventory despite the suspension of its
license to make, use, and sell such inventory, and that PlusOne intends to manufacture and/or sell
24,000 units for 2015. Van Alen and PlusOne have continued to market and sell such inventory
despite the termination of their permission to do so. Because the throw golf industry is in the
early stages of its formation, Evans and WhipGolf are being further irreparably injured by
PlusOnes unlawful market position as the first mover in this industry every day that they
unlawfully use Evanss and WhipGolfs intellectual property without permission:
The loss or gain of a customer may have harms or benefits beyond
just the sale of the patented product. Customers often choose to do
all of their business with one supplier, therefore, the ability to
attract customers with exclusive access to an innovative product is
often relied on to increase the sales of other products and services
as well.
ePlus, Inc. v. Lawson Software, Inc., No. 3:09-cv-620, 2011 WL 2119410, at *11 (E.D. Va. May
23, 2011), modified, 946 F. Supp. 2d 459 (E.D. Va. 2013) (quoting Bendix Commercial Vehicle
Sys., LLC v. Haldex Brake Prods., No. 1:09-cv-176, 2011 WL 14372, at *6 (N.D. Ohio Jan. 3,
2011)).
V. THERE ARE COMPELLING PUBLIC POLICY REASONS TO ENJOIN THE
CONTINUED BREACH OF THE AGREEMENT BY DEFENDANTS.
A court should pay particular regard for the public consequences in employing the
extraordinary remedy of injunction. Winter at 376-77. As explained by Judge Payne while
24
granting an injunction to prevent impermissible patent infringement, the public interest served by
protecting intellectual property interests is substantial:
The public has a strong interest in maintaining the integrity of the patent system. MercExchange, 500 F.Supp.2d at 586 (quoting Odetics, 14 F. Supp.2d at 795). The Federal Circuit has long acknowledged the importance of the patent system in encouraging
innovation. SanofiSynthelabo v. Apotex, Inc., 470 F.3d 1368, 1383 (Fed. Cir. 2006). Indeed, the encouragement of investment-based risk is the fundamental purpose of the patent grant, and is
based directly on the right to exclude. Id. (quoting Patlex Corp. v. Mossinghoff, 758 F.2d 594, 599 (Fed. Cir. 1985)). Thus, the
Court gives considerable weight to the strong public interest
favoring entry of injunctive relief to protect ePlus's patent rights.
ePlus, Inc., 2011 WL 2119410, at *11.2
Accordingly, the public interest is served by the issuance of an injunction in this case.
CONCLUSION
For the foregoing reasons, Evans and WhipGolf request that the Court grant their Motion
for a Preliminary Injunction against Defendants and enter an Order:
a. Enjoining Defendants from making, using, or selling any product licensed
by the parties Term Sheet; and
b. Awarding such ancillary and further relief as the Court deems appropriate
on the facts and circumstances appropriate for this case.
2 In addition, PlusOnes selling and/or marketing goods with a circle-R designation of a federal trademark
registration when none exists provides a public policy reason to enjoin the continued breach. This Court has a clear
role to play in protecting the public from PlusOnes misuse of the federal trademark registration symbol. See, e.g., Diamonds Direct USA, Inc. v. BFJ Holdings, Inc., 895 F. Supp. 2d 752, 762 (E.D. Va. 2012) (The twin aims of trademark law are to protect the public from deceit and to protect investment from its misappropriation by pirates and cheats.)
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Date: July 2, 2015 Respectfully submitted,
CURTIS A. EVANS AND
WHIPGOLF, LLC
By Counsel
LeCLAIRRYAN, P.C.
___________/s/___________________
Laurin H. Mills (VSB No. 79848)
Andrew J. Narod (VSB No. 79691)
2318 Mill Road, Suite 1100
Alexandria, VA 22314
Tel: (703) 647-5903
Fax: (703) 647-5953
BAYARD, P.A.
____________/s/___________________
Stephen B. Brauerman (No. 4952)
Vanessa R. Tiradentes (No. 5398)
Sara E. Bussiere (No. 5725)
222 Delaware Avenue, Suite 900
P.O. Box 25130
Wilmington, DE 19899-5130
(302) 655-5000
Counsel for Curtis A. Evans
CERTIFICATE OF SERVICE
I hereby certify that on July 2, 2015, I electronically filed the foregoing document with
the Clerk of Court using the CM/ECF system, which will send notice of such filing to counsel of
record who are registered with CM/ECF.
/s/ Andrew J. Narod