United States District Court, N.D. Illinois, Eastern Division
MAXTECH CONSUMER PRODUCTS, LTD., AND INSTY-BIT LLC, Plaintiffs,
CHERVON NORTH AMERICA INC., TECHTRONIC INDUSTRIES CO. LTD., MILWAUKEE ELECTRIC TOOL CORPORATION, AND TECHTRONIC POWER TOOLS TECHNOLOGY LIMITED, Defendants.
MEMORANDUM OPINION AND ORDER
J. THARP, JR. UNITED STATES DISTRICT JUDGE.
Maxtech Consumer Products, Ltd. (“Maxtech”) and
defendant Chervon North America, Inc. (“Chervon”)
entered into a joint venture under which Chervon agreed to
sell products using Maxtech's intellectual property. That
joint venture fell apart, however, shortly after Chervon
informed Maxtech that the purposes of the joint venture could
no longer be accomplished and that all joint venture projects
would “be suspended.” Maxtech filed suit alleging
that Chervon wrongfully terminated the joint venture. Chervon
now moves to dismiss Maxtech's amended complaint, arguing
that Maxtech conflated its breach of contract and
anticipatory repudiation theories of relief and failed to
state a claim under either theory. But it is Chervon, not
Maxtech, that has conflated applicable legal standards,
specifically the pleading standards under state and federal
law. Federal pleading standards govern here, and under those
standards Maxtech has stated a plausible claim for relief.
Chervon's motion to dismiss the amended complaint is
designs, manufactures, and owns intellectual property for
hand tools and power tool accessories. On January 6, 2017,
Maxtech entered into a Joint Venture Agreement with Chervon
under which Maxtech granted Chervon an exclusive license to
manufacture and sell power tools and accessories using
Maxtech's intellectual property, including U.S. Patent
No. 6, 561, 523 B1 (the “'523 patent”). First
Supplement to Chervon's Mot. to Dismiss, Ex. A, Joint
Venture Agreement, ECF No. 28-1. Chervon and Maxtech agreed
to participate in the joint venture for a term of ten years
unless it was terminated earlier in accordance with the terms
of the Joint Venture Agreement. Chervon was required under
the Joint Venture Agreement to pay Maxtech a substantial
licensing fee in two equal installments, with the first
installment to be paid immediately and the second to be paid
by March 2018. Chervon was also required to provide sales and
production services for the joint venture, pay Maxtech a
royalty on net sales, share a portion of its profits with
Maxtech, and keep the books of account for the joint venture.
If a party breached the Joint Venture Agreement and did not
cure the breach within sixty days (or an otherwise reasonable
time) of receiving notice of the breach, then the
non-breaching party could terminate the Agreement.
after Maxtech and Chervon executed the Joint Venture
Agreement, Chervon entered into a settlement agreement in
unrelated litigation involving two other companies, one of
which was Techtronic Industries Co. Ltd. (“TTI”).
That settlement agreement allegedly required Chervon to
“abandon its right to exclusivity on the ‘523
patent and related technology, a right which was a key part
of the Joint Venture Agreement.” Am. Compl. ¶ 24,
ECF No. 11. Accordingly, on January 4, 2018,
Chervon's President and CEO Bill Boltz sent an email to
Maxtech's CEO Kailash Vesudeva stating in relevant part:
According to the recent settlement agreement between TTI and
Chervon, Chervon is required to provide a copy of Section 22
of the agreement to Maxtech.
With respect to the notice that needs to be provided to
Maxtech by January 6th, regarding changes to our business
agreement, Chervon is making the following changes through
this notice to modify our current agreement.
1. All current Chervon and Maxtech projects will be suspended
and the monthly service fee will not be paid after the first
12 months have been completed.
2. Chervon will provide consent that Maxtech may revoke the
termination of their license agreement with TTI and TTI may
continue as a non-exclusive licensee under the Intsy-Bit
license through the duration of all Intsy-Bit Patent Rights.
3. Since the original purpose of the exclusive license
arrangement between Chervon and Maxtech cannot be achieved,
Chervon is now proposing the following 2 options:
1. Option 1: Chervon will pay the second . .
. installment to Maxtech, in exchange, Maxtech will pay to
Chervon the lump sum royalties received from TTi for the
future license till the end of duration of the patents or the
end of agreement between Chervon and Maxtech, whichever is
2. Option 2: Maxtech will keep all lump sum
and royalties received from TTi for the future license, while
Chervon will not pay the second . . . installment.
If Maxtech will agree to either option, Chervon will not
claim back the first [installment] paid last year.
Mot. to Dismiss, Ex. B, Email from Boltz to Vasudeva dated
Jan. 4, 2018, ECF No. ...