United States District Court, N.D. Illinois, Eastern Division
G. MICHAEL MCNAMEE, Plaintiff,
MINXRAY, INC., Defendant.
Honorable Edmond E. Chang, United States District Judge.
G. Michael McNamee filed this suit against Defendant MinXray,
Inc., alleging two breach of contract claims centered around
agreements for the licensing and manufacture of various
portable x-ray technologies. R.1, Compl. ¶¶
17-23. MinXray now brings a motion to dismiss
Count One of McNamee's complaint for failure to state a
claim. R. 7, Mot. to Dismiss. For the reasons that follow,
MinXray's motion to dismiss is denied.
evaluating a motion to dismiss, courts must “accept all
well-pleaded facts as true and draw reasonable inferences in
the plaintiffs' favor.” Roberts v. City of
Chi., 817 F.3d 561, 564 (7th Cir. 2016). McNamee is an
inventor of portable x-ray and imaging equipment. Compl.
¶ 8. MinXray makes, sells, and distributes portable
x-ray and imaging products. Id. In 2006, McNamee and
MinXray entered into an agreement, Compl. Exh. 1, 2006
Agreement, to keep certain proprietary information
confidential while they explored a possible business
relationship. Id. ¶¶ 5-6. That agreement
defined “proprietary” information as information
given by McNamee to MinXray about McNamee's suppliers,
his trade secrets, formulas, product plans, specifications,
trademarks, copyrights, and other intellectual property
information. Id. ¶ 6. The Agreement also
specifically defined proprietary information to include
information related to “a Mobile Digital X-ray Unit,
” known by the acronym “MDX.” Id.
The definition explained that MDX is “a portable stand
designed to mount to a portable x-ray generator with any
digital radiology detector plate and any laptop
2006 Agreement further stated that McNamee would own outright
any products developed from the proprietary information given
to MinXray, and that MinXray would not be entitled to any
royalty, commission, or payment for sale of those products
without McNamee's consent. Compl. ¶ 6. According to
the complaint, over the next two years, McNamee gave MinXray
a few different types of proprietary information,
specifically information about: (i) MDX; (ii) “portable
housings for digital imaging equipment, ” called a
“Digital Imaging Housing Package” (DIHP); (iii)
the design, making, and selling of direct radiography (DR)
portable and mobile equipment; and (iv) the design, making,
and selling of “portable and mobile medical equipment
in general.” Id. ¶ 7.
15, 2008, McNamee and MinXray formed the business
relationship contemplated by the 2006 Agreement, signing a
new contract called “License and Consulting Service
Agreement.” Compl. ¶ 8; R. 1, Compl., Exh. 2, 2008
Agreement. The new agreement granted MinXray a license to
make and sell McNamee's “DIHP” (Digital
Imaging Housing Package) invention and gave McNamee royalties
for each sale. 2008 Agreement. McNamee alleges that starting
from the date of the 2008 Agreement through May 15, 2015,
MinXray designed, made, or sold five products that
incorporated his DIHP technology: CMDR-1S, CMDR-2S, MDRK-2,
CMDR-2SLW, and Integris. Compl. ¶ 9. MinXray paid
McNamee royalties for three of these products, but did not
pay McNamee royalties for CMDR-2SLW or Integris because it
disputed that those products were covered by the 2008
Agreement. Id. ¶¶ 10, 12-13.
2015, McNamee wrote to MinXray, asserting a right to receive
royalties for CMDR-2SLW and Integris, and requesting
MinXray's sales records for both of those products.
Compl. ¶ 11. Believing that CMDR-2SLW and Integris used
his DIHP technology, McNamee repeatedly wrote to MinXray
asking for royalties. Id. ¶ 14. MinXray refused
to turn over the sales records, maintaining that it had paid
royalties on all products covered by the 2008 Agreement, and
arguing that CMDR-2SLW and Integris models “do not
incorporate the technology developed by [McNamee] under our
agreement.” Id. ¶¶ 12, 15-16.
bringing this suit, McNamee alleges two breach of contract
claims. Compl. ¶¶ 17-23. Count One arises out of
the 2006 Agreement. Id. ¶¶ 17-20. Assuming
for the purpose of this count that the CMDR-2SLW and Integris
models do not use McNamee's DIHP technology, McNamee
alleges that these two products are based on other
proprietary information (such as information relating to the
Mobile Digital X-Ray Unit and “mobile medical equipment
utilizing [direct radiography]”) that McNamee provided
to MinXray under the 2006 Agreement. Id. ¶ 18.
In “designing, manufacturing, and/or selling”
CMDR-2SLW and Integris based on McNamee's proprietary
information, MinXray allegedly breached the 2006 Agreement.
Id. ¶¶ 19-20.
alternative, McNamee alleges that CMDR-2SLW and Integris
do incorporate the DIHP technology and are thus
covered by the 2008 Agreement. Compl. ¶¶ 21-23.
Because MinXray has not paid royalties on these two products,
McNamee contends that MinXray has breached the 2008 Agreement
and owes him a $2, 500 royalty payment for each sale of the
relevant products between May 2008 and May 2015, and for any
sale thereafter (because a royalty-free license to sell that
was to be granted to MinXray by McNamee in 2015 is now
allegedly null and void). Id. ¶ 23.
initially brought a motion to dismiss both claims under
Federal Rule of Civil Procedure 12(b)(6), Mot. to Dismiss,
arguing that neither count adequately stated a claim, but
later withdrew its motion as against the second count (breach
of 2008 Agreement). MinXray also withdrew one aspect of its
argument against the first count (breach of 2006 Agreement).
See R. 18, 5/17/17 Letter by MinXray, Inc.; see
also R. 20, 5/18/17 Letter by McNamee.3 This Opinion
addresses the remaining argument in the dismissal motion.
Standard of Review
complaint must contain “a short and plain statement of
the claim showing that the pleader is entitled to
relief.” Fed.R.Civ.P. 8(a)(2). This statement must
“give the defendant fair notice of what the ... claim
is and the grounds upon which it rests.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
The Seventh Circuit has explained that this rule
“reflects a liberal notice pleading regime, which is
intended to ‘focus litigation on the merits of a
claim' rather than on technicalities that might keep
plaintiffs out of court.” Brooks v. Ross, 578
F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v.
Sorema NA., 534 U.S. 506, 514 (2002)).
motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) challenges the viability of a complaint by arguing
that it fails to state a claim upon which relief may be
granted.” Camasta v. Jos. A. Bank Clothiers,
Inc., 761 F.3d 732, 736 (7th Cir. 2014). “[A]
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face.'” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
Factual allegations “must be enough to raise a right to
relief above the speculative level.” Twombly,
550 U.S. at 555; see also E.E.O.C v. Concentra Health
Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007). Factual
allegations-as opposed to mere legal conclusions-are entitled
to the assumption of truth. Iqbal, 556 U.S. at
678-79. “A pleading that offers ‘labels and
conclusions' or a ‘formulaic recitation of the
elements of a cause of action will not do.'”
Id. at 678 (2009) (quoting Twombly, 550
U.S. at 555).