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Leitner-Wise v. LWRC International, LLC

United States District Court, D. Maryland, Southern Division

February 28, 2017

PAUL ANDREW LEITNER-WISE, Plaintiff,
v.
LWRC INTERNATIONAL, LLC, et al., Defendants.

          MEMORANDUM OPINION

          GEORGE J. HAZEL United States District Judge

         Plaintiff Paul Andrew Leitner-Wise brings this case against Defendants LWRC International. LLC ("LWRCI”) and Sig Sauer. Inc. ("Sig Sauer") alleging patent infringement. breach of contract and unjust enrichment in relation to his 2004 invention of a "Self-Cleaning Gas Operating System for a Firearm." ECF No. 1. Pending be lore the Court are Defendant Sig Sauefs Motion to Dismiss. ECF No. 14. and Defendant LWRCIs Motion to Dismiss, or in the Alternative, for Summary Judgment. ECF No. 1 5. These issues have been fully briefed and a hearing is unnecessary. Loc. R. 105.6 (D. Md. 201 6). For the reasons stated below, the Court will grant Defendant Sig Sauer. Ine.'s Motion to Dismiss in full and Defendant LWRCIs Motion to Dismiss as it relates to the patent infringement claim. Furthermore, the Court will convert LWRCIs Motion to Dismiss into a Motion for Summary Judgment with respect to the breach of contract and unjust enrichment claims, and will grant LWRCIs Motion for Summary Judgment as to those claims.

         I. BACKGROUND[1]

         In 2004. Plaintiff created a "Self-Cleaning Gas Operating System for a Firearm, " a self-regulating short-stroke piston operating system for AR-15 type self-loading rifles, and was subsequently awarded a patent for his invention by the U.S. Patent Office ("the '581 patent"). ECF No. 1 ¶ 19; ECF No. 1 -1. Plaintiff founded a company named Leitner-Wise Rifle Company, Inc. ("LWRC"). which he then sold in 2005. ECF No. 1 ¶¶21-22. On April 11. 2005. Plaintiff was retained by LWRC as an executive and entered into an employment agreement defining the terms of their relationship. ECF No. 1 at ¶ 22; see also ECF No. 1-2. The employment agreement contained a provision acknowledging that Plaintiff had

developed certain Intellectual Property prior to the execution of this Agreement which Employer desires to exercise ownership rights....Employer will separately psgy a royalty of one half of one percent (.05%) on the net sale price of each product containing a previously patented or patentable or otherwise protected device developed by the Executive....Payment of royalties under this section shall not be withheld or terminated regardless of any Termination of the Executive for any reason.

ECF No. 1 ¶ 23: see also ECF No. 1-2 at 8.[2] Plaintiff left his employment with LWRC on October 31, 2006. and on the same date, assigned the pending "581 patent to his former employer. ECF No. 1 ¶ 24: see also ECF No. 1-3. The Assignment stated that

[i]n consideration of the sum of One Dollar ($1.00) or equivalent and other good and valuable consideration paid to...Paul Leitner-Wise, the undersigned, hereby sell(s) and assign(s) to Leitner-Wise Rifle Company. Inc..their entire right, title and interest...in the invention known as "Self Cleaning Gas Operating System for a Firearm."

ECF No. 1-3.

         Contemporaneously with his departure. Plaintiff executed additional contracts with LWRC.[3] On October 31. 2006. Plaintiff signed a document entitled "'Termination of Employment" which included a provision releasing LWRC "from any and all claims....including, but not limited to. all claims arising out of [Plaintiffs] employment, all claims arising out of the Employment Agreement.... [and] all breach of contract and other common law claims." ECF No. 15-6 at 1-2. An additional contract entitled "Intellectual Property Assignment Agreement By And Between Paul Leitner-Wise and Leitner-Wise Rifle Co. Inc." (hereinafter. "Intellectual Property Agreement") included a provision stating that "[Leitner-Wise] hereby transfers and assigns to [LWRC] all of [Leitner-Wise's] right, title and interest to any and all Intellectual Property ownership interest [Leitner-Wise] may have throughout the world in and to the Assigned Intellectual Properties." ECF No. 15-8 at 2. "Assigned Intellectual Properties" is separately defined in the contract to include the '581 patent. See ECF No. 15-8 at 1.7. Furthermore, a section in the same contract entitled "Payment and Communication." stated that "the consideration for the assignment and other rights granted to [LWRC] under this Agreement consists of good and valuable consideration, the sufficiency of which is hereby acknowledged by [Leitner-Wise] pursuant to a separate Equities Purchase Agreement, and the consummation of the transactions contemplated thereby, there being no further consideration or royalty payable in respect thereof." ECF No. 15-8 at 3 (emphasis added).[4] This contract was also signed by Plaintiff on October 31. 2006. the same day that the "581 patent was assigned to LWRC. ECF No. 15-8 at 6; see also ECF No. 1-3.

         On April !8. 2008. LWRC assigned the '581 patent to Defendant LWRC1. ECF No. 1 ¶ 29; ECF No. l-4.[5] Plaintiff claims that this assignment was made without due consideration of the royalties entitled to him pursuant to his employment agreement with LWRC, which he claims survived his termination from LWRC. Id. ¶¶[ 34-35. Plaintiff states that neither LWRCI nor Sig Sauer ever paid him for the value received from their ongoing use of the intellectual property contained within the '581 patent, hi ¶ 48.

         Plaintiff initiated this case on June 29. 2016. asserting claims of patent infringement and unjust enrichment against both LWRCI and Sig Sauer. as well as a claim of breach of contract against LWRCI alone. ECF No. 1. On September 6. 2016. Sig Sauer Hied a Motion to Dismiss. arguing that the case should be dismissed pursuant to either Rule 12(b)(1) for lack of standing, because Plaintiff had relinquished his rights to the '581 patent, or pursuant to 12(b)(6) for failure to state a claim. ECF No. 14. The same day. LWRCI tiled a Motion to Dismiss, or in the Alternative, for Summary Judgment, echoing Sig Sauer"s arguments that the case could be dismissed either for lack of standing or for failure to state a claim. ECF No. 15. Both Defendants also requested that the Court award them attorneys' fees and costs associated with drafting their respective motions. ECF No. 15-1 at 17-20: ECF No. 14-1 at 21-22.

         On September 22. 2016. Plaintiff filed a Consolidated Opposition to Defendants" Motions to Dismiss, arguing that Plaintiff's right to receive royalties provided him with standing to assert a patent infringement claim. ECF No. 1 8. Plaintiff also argues that converting LWRCI's Motion into a Motion for Summary Judgment is inappropriate because the documents on which LWRCI relies are not authenticated. ECF No. 18 at 5. On October 1 ]. 2016. Defendants filed their Replies in support of their respective Motions. ECF Nos. 19 (Sig Saner) & 20 (LWRCI).

         II. STANDARDS OF REVIEW

         A. Motion to Dismiss Pursuant to Rule 12(b)(1)

         "[C]ourts generally analyze issues of standing pursuant to Rule 12(b)(1)." Borlo v. Navy Fed (redti Union, 458 BR. 228. 231 (D. Md. 2011). which governs motions to dismiss for lack of subject matter jurisdiction. Fed. R. Civ. Pro. 12(b)(1). ""It is well established that before a federal court can decide the merits of a claim, the claim must invoke the jurisdiction of the court." Miller v. Brown, 462 F.3d 312. 316 (4th Cir. 2006) (citation omitted). Once a challenge is made to subject matter jurisdiction, the plaintiff bears the burden of proving that the Court has subject matter jurisdiction. See Evans v. B.F. Perkins Co.. a Div. oj Standex lnt'l Corp.. 166 F.3d 642. 647 (4th Cir. 1999) (citation omitted): see also Ferdinand-Davenport v. Children's Guild. 742 F.Supp.2d 772. 777 (I). Md. 2010). The court should grant a Rule 1 2(b)(1) motion "only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Evans. 166 F.3d at 647.

         B. Motion to Dismiss Pursuant to Rule 12(b)(6)

         To survive a motion to dismiss invoking 12(b)(6). "a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face."' Ashcrofi v. Iqbal. 556 U.S. 662. 678 (2009) (citing Bell Atlantic Corp. v. Twombly. 550 U.S. 544. 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal 556 U.S. at 678. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555) ("a plaintiffs obligation to provide the 'grounds' of his 'entitlement] to relief requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do.").

         Fed. R. Civ, P. L2(b)(6)'s purpose "is to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480.483 (4th Cir. 2006) (citation and internal quotation marks omitted). When deciding a motion to dismiss under Rule 12(b)(6). a court "must accept as true all of the factual allegations contained in the complaint." and must "draw all reasonable inferences [from those facts] in favor of the plaintiff." E.l. du Font de Nemours & Co. v. Kolon Indus., Inc.. 637 F.3d 435. 440 (4th Cir. 2011) (citations and internal quotation marks omitted). The Court need not. however, accept unsupported legal allegations, see Reverie v. Charles County Coinin'rs. 882 F.2d 870. 873 (4th Cir. 1989). legal conclusions couched as factual allegations. Fupasan v. Allain, 478 U.S. 265, 286 (1986). or conclusory factual allegations devoid of any reference to actual events. United Black Firefighters of Norfolk v. Hirst, 604 F.2d 844. 847 (4th Cir. 1979).

         C. Converting Motion to Dismiss to Motion for Summary Judgment

         LWRCI's motion is styled as a Motion to Dismiss or. in the Alternative, for Summary Judgment under Fed.R.Civ.P. 56. If the Court considers materials outside the pleadings, as the Court does here, the Court must treat a motion to dismiss as one for summary judgment. Fed.R.Civ.P. 12(d). When the Court treats a motion to dismiss as a motion for summary judgment, "fa]ll parties must be given a reasonable opportunity to present all the material that is pertinent to the motion." Id. When the moving party styles its motion as a "Motion to Dismiss or. in the Alternative, for Summary Judgment." as is the case here, and attaches additional materials to its motion, the nonmoving party is. of course, aware that materials outside the pleadings are before the Court, and the Court can treat the motion as one for summary judgment. See LaughVm v. Metropolitan Wash. Airports Aiuh., L49 F.3d 253. 260-61 (4th Cir. 1998). Further, the Court is not prohibited from granting a motion for summary judgment before the ...


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