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Xado Tech, LLC v. U.S. Envirotech, Inc.

United States District Court, N.D. Illinois, Eastern Division

August 5, 2014

XADO TECH, LLC and XADO-HOLDING, Plaintiffs,
v.
US ENVIROTECH, INC., Defendant.

MEMORANDUM OPINION AND ORDER

ROBERT W. GETTLEMAN, District Judge.

Plaintiffs XADO Tech LLC and XADO-Holding (collectively "plaintiffs") sued defendant U.S. Envirotech, Inc. ("defendant") for trademark infringement, false advertising, cyber-squatting, deceptive trade practices, and unjust enrichment stemming from defendant's alleged unauthorized use of the XADO trademark on products and in advertisements, and false claims of association with plaintiffs. Defendant has moved for partial summary judgment pursuant to Federal Procedure Rule 56, arguing that the case should be dismissed for dismissal for forum non conveniens, based on a forum selection clause in an agreement between defendant and another company closely associated with plaintiffs.[1] For the reasons discussed below, the court dismisses the case on the basis of forum non conveniens.

BACKGROUND[2]

Plaintiffs are producers and distributors of automotive "revitalizants."[3] Plaintiff XADO Holding owns the "XADO" mark, which was registered on May 11, 2004, and is used in marketing, selling, and distributing "revitalizants, " atomic metal conditioners, and refrigerant products. Defendant advertises, markets, and sells lubricants for automobiles.

In December 2008, defendant entered into a Distribution Agreement ("the December Agreement") with XADO America, LLP ("XADO America"), a Kansas LLP formed by XADO USA, LC ("XADO USA") and XADO Technology, Ltd ("XADO Technology").[4] The December Agreement granted defendant an exclusive distribution right. The agreement states (emphasis added):

The parties agree that [defendant] shall market, distribute and sell all "products" purchased from Supplier under the private label "FRIKTIONTEK" or any other private label determined by [defendant]. [Defendant] retains the right to sell all "products" purchased from Supplier under Supplier's trademarks, tradenames and tradedress.

The agreement additionally provides that defendant is the exclusive distributor in terms of marketing, distribution, and sales of the supplier's products under the "FRIKTIONTEK" label or any other private label defendant approves. Further, the December Agreement grants defendant "the exclusive right to the use and commercial dissemination of... test results and case studies of the products' or any other of Supplier's intellectual property for use in [defendant's] marketing and sales."

Of particular importance, the agreement also contains a forum-selection clause ("the forum selection clause" or "the clause"), which states (emphasis added):

This Agreement shall be governed by, and its terms shall be construed in accordance with, the laws of the State of New Mexico. Any unresolved disagreement between the parties resulting from the implementation or interpretation of this Agreement shall be resolved in the Second District Court in the State of New Mexico.

The initial term of the December Agreement is for ten years commencing on December 8, 2008 unless terminated by written notice from either party. The parties further agreed that the December Agreement binds respective successors to the contents of the agreement.

After the agreement was executed, defendant secured various national accounts to distribute XADO products, labeled "FriktionTek by XADO, " in the United States. Defendant designed new packages for XADO products, which were approved by a representative of XADO Technology and XADO Chemical Concern, another XADO-affiliated company. On the website www.friktiontek.com, defendant advertised, marketed, and sold "FriktionTek by XADO" products. Defendant also asserted its affiliation with XADO, including "the exclusive rebranding and packaging rights to all XADO products sold in North America, " on the website. Further, defendant registered and currently runs website www.xadousa.com to advertise, market, and sell ""FriktionTek by XADO" products.

In September 2008, prior to signing the December Agreement, defendant had ordered product from XADO America under a previous contract. Defendant received this product after the December Agreement was signed, and continued to receive product ordered under the previous contract until at least 2009. Plaintiffs and defendant dispute when defendant last received delivery of XADO product and when the last payment was made. According to plaintiffs, the last delivery occurred in 2009, and defendant did not pay any invoices for products shipped in 2009. Plaintiffs further allege that defendant markets and sells products, which are not XADO products, with the XADO label. According to defendant, the last delivery occurred on January 4, 2010, and the last payment to XADO America was made on December 4, 2009. Defendant also denies that it did not pay all invoices for products. Finally, defendant offers evidence that it received XADO products and sold products using the XADO mark well beyond 2009.

In May 2010, the owner and sole shareholder of XADO Technology, Vladimir Zozulya, formed plaintiff XADO Tech.[5] Acting as the majority interest holder in plaintiff XADO Holding, Zozulya executed a license agreement granting plaintiff XADO Tech the right to use the XADO trademark in the United States. In the fall of 2010, the XADO America partnership dissolved. The attorney for XADO Technology and its "sister companies" advised defendant of the end of XADO America's partnership and requested that defendant terminate the December Agreement with XADO Technology, enter into a new agreement with plaintiff XADO Tech, and transfer all rights of the xadousa.com website to XADO Technology. Defendant did not comply and plaintiffs requested that defendant not ...


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