Download pdf - Winston Company v. Redman & Associates et. al

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA

(1) WINSTON COMPANY, INC., an Oklahoma Corporation Plaintiff, vs. (2) REDMAN & ASSOCIATES, LLC , a foreign limited liability company; (3) MELVIN REDMAN, an individual; and (4) WAL-MART STORES, INC., a foreign corporation Defendants.

Case No.: 12-CV-646-CVE-TLW

COMPLAINT

COMES NOW the Plaintiff, Winston Company, Inc. (“Winston”) and for its

cause of action against the Defendants states and alleges as follows:

JURISDICTION AND VENUE

1. This action is brought pursuant to 35 U.S.C. § 271 for patent infringement,

and thus this Court has subject matter jurisdiction over the action.

2. Additionally, this Court has diversity jurisdiction over this matter.

3. Winston Company, Inc., is an Oklahoma corporation with its principal

place of business in Tulsa, Oklahoma.

4. Upon information and belief, Redman & Associates, LLC (“R&A”) is an

Arkansas limited liability company with its principal place of business in Arkansas.

5. Upon information and belief, Melvin Redman (“Redman”) is a resident of

Bentonville, Arkansas.

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6. Upon information and belief, Wal-Mart Stores, Inc. (“Wal-Mart”) is a

Delaware corporation with its principal place of business in Arkansas.

7. The amount in controversy in this action is in excess of $75,000.00,

exclusive of interest and costs.

8. This Court has personal jurisdiction over Redman and R&A, as they have

had systematic contacts with Tulsa, Oklahoma and the Northern District of Oklahoma,

both related to the subject matter of this case and otherwise.

9. This Court has personal jurisdiction over Wal-Mart, as it has purposefully

availed itself of this market with systematic contacts, including building numerous Wal-

Mart stores within the Northern District of Oklahoma and selling the specific products at

issue in those stores.

10. Venue is proper in this District, as many of the complained-of acts have

occurred in this District, and Redman and R&A have consented to the venue by virtue of

the Teaming Agreement (as set forth below).

RELEVANT FACTS

11. Winston is a family-owned company that has sold chemicals and related

items—including household chemicals, pond treatment, pet chemicals, and automotive

chemicals—to stores such as Wal-Mart for many years.

12. In November 2009, Winston was made aware of an issue with another

Wal-Mart vendor. Winston brokered a deal with Wal-Mart and the other interested

parties (including Disney Enterprises, Inc.) to assume goods that the other Wal-Mart

vendor was unable to properly supply to Wal-Mart. These goods were largely Disney-

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branded toys, particularly 6-volt powered battery-operated ride-on toys known as

“quads.”

13. After this deal, Winston was appointed as the vendor of record for Wal-

Mart’s and Disney’s 6-volt ride-on toy business, delivering millions of dollars of toys

every year to be sold in Wal-Mart stores nationwide. These toys were mainly quads,

scooters, and bicycles.

14. Around the time of the deal, Winston made contact with Defendant

Melvin Redman to assist with its vendor relationship with Wal-Mart. Redman was a

longtime high-level employee with Wal-Mart before leaving and beginning his own

business known as Redman & Associates. Redman represented that he and/or R&A

could assist Winston with its vendor relationship and contracts with Wal-Mart.

15. As a result of Redman’s representations, Winston entered into a “Teaming

Agreement” with R&A to create a “Venture” to provide certain products to Wal-Mart.

See Teaming Agreement, attached as Exhibit “1.” The Teaming Agreement provided that

R&A would manage and maintain the sales and supply chain for the Products (which

were identified as quads, scooters, and bicycles) and Winston’s relationship with Wal-

Mart, and assist with licensing and other agreements with parties such as Disney, Marvel,

and Golden Wheel America. Winston agreed to do a host of other things, including

maintaining accounts, obtaining financing, using its Wal-Mart vendor number, creating

budgets and financial statements, and other finance-related responsibilities. Additionally,

the Teaming Agreement provides that it shall be construed in accordance with the laws of

the State of Oklahoma.

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16. The Teaming Agreement provided that neither party would directly or

indirectly sell or participate in the purchase, sale or distribution of the Products during the

term of the Agreement except through the Venture without written consent of the other

party. See Exhibit 1 at paragraph 4.

17. The Teaming Agreement further provided that in the event of a breach of

the Agreement, the non-breaching party may seek recovery of damages suffered,

including its attorney fees and costs. See Exhibit 1 at paragraph 7. See also paragraph 21

(prevailing party of any litigation brought to enforce the terms of the Teaming Agreement

is entitled to attorney fees and costs).

18. During the course of the relationship between Redman, R&A, and

Winston, Winston determined a new type of box would be beneficial to the display of its

quads. Specifically, they determined that a box that would still enable customers to view

the product and even see if a child would fit properly on the quad would have more utility

than a disassembled quad inside a closed box, and was not currently being provided in the

marketplace. As a result, Winston created such a box for use with the quads it provided

Wal-Mart.

19. The box design became the subject of a Design Patent, specifically Patent

# D666,903. See Patent # D666,903, attached as Exhibit “2.” (the “ ’903 Patent ”) The

Application was filed in June 2011, listing the following inventors: John Ralph McIntosh

(then and current Chief Operating Officer at Winston), Melvin C. Redman, and Neal

Winston Zahn, (then and current President of Winston). Together with the Application,

all three listed inventors signed a Patent Assignment, assigning all rights, title, and

interest in the Patent to Winston Company, Inc. See Assignment, attached as Exhibit “3.”

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That Assignment was filed with the U.S. Patent and Trademark Office on June 8, 2011,

signed by all three inventors.

20. Additionally, a Patent Application was filed for a Utility Patent on the

box. That Application was also filed in June 2011, listing the same three inventors. See

Application # 13/161,288, attached as Exhibit “4.” Likewise, an Assignment of all rights,

title, and interest in the Utility Patent was executed by McIntosh, Redman, and Zahn and

filed with the U.S. Patent and Trademark Office on June 16, 2011. See Second

Assignment, attached as Exhibit “5.”

21. The Venture between R&A and Winston that was governed by the

Teaming Agreement went forward in 2010 and 2011 with success. Winston provided

millions of dollars in merchandise to Wal-Mart for sales in its stores. In fact, on “Black

Friday” (the day after Thanksgiving) in 2011, two Winston quads were the top two toys

sold at Wal-Mart nationwide (by revenue).

22. In January 2012, Wal-Mart began receiving complaint calls from

customers regarding the quads. The issue was that the manufacturer (located in China)

had (without Winston knowing) included the wrong battery and charger combination, so

they would not charge. This led to thousands of returns and complaints that negatively

impacted Winston’s payment for the products.

23. As a result, in early 2012, the Venture determined it would need to use a

separate vendor number owned by R&A to vend certain products, as a one-time solution.

Since that time, however, R&A and/or Redman have—without consent or actual notice to

Winston—taken over and improperly severed Winston’s relationship with the Chinese

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manufacturer and Wal-Mart and begun vending the quads to Wal-Mart directly, outside

the structure of the Venture.

24. R&A and/or Redman have been using the boxes designed by Winston and

which are covered by the ‘903 Patent and pending Utility Patent, directly infringing upon

the ‘903 Patent and pending Utility Patent, which are owned in whole by Winston.

25. On November 1, 2012, Neal Zahn went to a local Wal-Mart located at

111th Street and South Memorial Drive in Bixby, Oklahoma. He noted Wal-Mart was

displaying the infringing quad/box combinations in a section that is being prepared for

the Christmas toy season. See Photograph of display, attached as Exhibit “6.” Zahn

purchased a Spider-Man quad that is contained in one of the patented boxes. See

Photograph of purchased quad side-by-side with quad in basic patented box, showing

they are identical, attached as Exhibit “7.” The Spider-Man quad box clearly states the

name of “Redman & Associates, LLC” in the upper right corner. See Close-up

Photograph, attached as Exhibit “8.”

26. Zahn made a purchase demonstrating the patent infringement for profit by

R&A and Wal-Mart. See Receipt, attached as Exhibit “9.”

27. These photographs are evidence of the infringement upon the ‘903 Patent

and pending Utility Patent by all Defendants, as well as the breach of the Teaming

Agreement by R&A, by sale of products using the box design that is the subject of the

‘903 Patent and pending Utility Patent.

28. During all times relevant, Redman made numerous trips to Tulsa

individually and in his capacity as representative of R&A. To wit, Redman met

numerous times with representatives of Arvest Bank, the lender who provided financing

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for the Venture; he met with the insurance providers for the Venture; he met with the

Winston employees involved in the Venture; and he met with Neal Zahn to team build

and discuss subjects relevant to the Venture. These visits occurred all the way through

2012.

29. Further, Redman and R&A maintained systematic and continuous contacts

with the forum. Upon information and belief, Redman has made personal visits to the

forum; R&A contracted with Tulsa-based Winston; R&A assigned rights to the Patents to

Tulsa-based Winston; and has sold the infringing goods in this venue. As stated above,

the Teaming Agreement further provides that it is to be construed in accordance with the

laws of the State of Oklahoma. The facts are more than sufficient to exhibit in personam

jurisdiction over R&A and Redman.

COUNT ONE –INFRINGEMENT OF THE ‘903 PATENT BY REDMAN & ASSOCIATES

30. The allegations of Paragraphs 1 through 28 are re-alleged and incorporated

by reference.

31. R&A has been using the patented box design with the quads it has been

directly providing to Wal-Mart for sale, as discussed above. Upon information and

belief, Defendant R&A has been and is now directly infringing upon the ‘903 Patent in

this judicial district and elsewhere in the United States. Defendant R&A is thus liable for

infringement of the ‘903 Patent pursuant to 35 U.S.C. § 271.

32. R&A had knowledge of the ‘903 Patent, as Redman was one of the

inventors of the ‘903 Patent and signed the Assignment of the rights and title to the ‘903

Patent back to Winston.

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33. R&A’s infringement of the ‘903 Patent has been and continues to be

willful. That willful infringement entitles Plaintiff to enhanced damages and attorneys’

fees pursuant to 35 U.S.C. §§ 284 and 285.

COUNT TWO – INFRINGEMENT OF THE PENDING UTILITY PATENT BY REDMAN & ASSOCIATES


by reference.

35. R&A has been using the patented box design with the quads it has been

directly providing to Wal-Mart for sale, as discussed above. Upon information and

belief, Defendant R&A has been and is now directly infringing upon the pending Utility

Patent in this judicial district and elsewhere in the United States. Defendant R&A is thus

liable for infringement of the pending Utility Patent pursuant to 35 U.S.C. § 271.

36. R&A had knowledge of the pending Utility Patent, as Redman was one of

the inventors of the Utility Patent and signed the Assignment of the rights and title to the

Utility Patent back to Winston.

37. R&A’s infringement of the pending Utility Patent has been and continues

to be willful. That willful infringement entitles Plaintiff to enhanced damages and

attorneys’ fees pursuant to 35 U.S.C. §§ 284 and 285.

COUNT THREE – PATENT INFRINGEMENT BY MELVIN REDMAN


by reference.

39. Upon information and belief, Redman has been using the patented box

design with the quads he has been directly providing to Wal-Mart for sale, as discussed

above. Upon information and belief, Defendant Redman has been and is now directly

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infringing upon the ‘903 Patent in this judicial district and elsewhere in the United States.

Defendant R&A is thus liable for infringement of the ‘903 Patent pursuant to 35 U.S.C. §

271.

40. Redman had knowledge of the ‘903 Patent, as he was one of the inventors

of the ‘903 Patent and signed the Assignment of the rights and title to the ‘903 Patent

back to Winston.

41. Redman’s infringement of the ‘903 Patent has been and continues to be

willful. That willful infringement entitles Plaintiff to enhanced damages and attorneys’

fees pursuant to 35 U.S.C. §§ 284 and 285

COUNT FOUR – INFRINGEMENT OF THE PENDING UTILITY PATENT BY MELVIN REDMAN


by reference.

43. Redman has been using the patented box design with the quads he has

been directly providing to Wal-Mart for sale, as discussed above. Upon information and

belief, Defendant Redman has been and is now directly infringing upon the pending

Utility Patent in this judicial district and elsewhere in the United States. Defendant

Redman is thus liable for infringement of the pending Utility Patent pursuant to 35

U.S.C. § 271.

44. Redman had knowledge of the pending Utility Patent, as Redman was one

of the inventors of the Utility Patent and signed the Assignment of the rights and title to

the Utility Patent back to Winston.

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45. Redman’s infringement of the pending Utility Patent has been and

continues to be willful. That willful infringement entitles Plaintiff to enhanced damages

and attorneys’ fees pursuant to 35 U.S.C. §§ 284 and 285.

COUNT FIVE – PATENT INFRINGEMENT BY WAL-MART


by reference.

47. Upon information and belief, Wal-Mart has stocked for sale, as discussed

above, quads which use the patented box design. Upon information and belief, Wal-Mart

has been and is now directly infringing upon the ‘903 Patent and pending Utility Patent in

this judicial district and elsewhere in the United States. Defendant Wal-Mart is thus

liable for infringement of the ‘903 Patent and pending Utility Patent pursuant to 35

U.S.C. § 271.

48. Upon information and belief, Plaintiff is unaware whether Wal-Mart had

knowledge of the ‘903 Patent or pending Utility Patent such that the infringement would

have been willful on the part of Wal-Mart.

COUNT SIX – UNFAIR COMPETITION


by reference.

50. Defendants R&A and Redman are unlawfully competing against Winston

by their misappropriation and use of the patented box design.

51. Winston has a unique and pecuniary interest in the box design, and the

conduct of R&A and Redman demonstrates their intent to promote their own interests at

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the expense of the interests and rights of Winston. Accordingly, Winston is entitled to

recover damages suffered as a result of this unfair competition.

52. Additionally, the unfair competition has had and will continue to have a

significant negative effect upon Winston’s business.

53. The conduct of R&A and Redman was intentional, malicious, willful,

wanton, and in gross disregard of the rights of Winston, and with the intent to injure

Winston. Accordingly, Winston is also entitled to punitive damages.

COUNT SEVEN – BREACH OF TEAMING AGREEMENT


by reference.

55. The actions set forth above constitute a breach of the Teaming Agreement

by R&A, as R&A directly sold quads in 2012 using the patented box design outside of

the Venture, without the written consent of Winston.

56. In fact, Redman and/or R&A apparently were exploring how to “get out”

of the Teaming Agreement as early as July 2011, as evidenced by the attorney billing

notes for July. See Billing Notes, attached as Exhibit “10.” This was done using the law

firm that represented not only Redman but also Winston—and that law firm sent the

billing statement to Winston. See Exhibit 10.

57. As a result of the breach of the Teaming Agreement, Winston has suffered

actual damages, including but not limited to loss of business, loss of profits, and loss of

business goodwill. Winston is therefore entitled to actual damages.

58. Pursuant to the terms of the Teaming Agreement, Winston is also entitled

to its attorney fees and costs incurred in prosecuting this matter.

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COUNT EIGHT – INTERFERENCE WITH BUSINESS RELATIONSHIP


by reference.

60. R&A and Redman were aware of the business relationship between Wal-

Mart and Winston.

61. R&A and Redman interfered with the relationship by inducing the

manufacturer of the products to sever ties with Winston and deal only with them.

62. Upon information and belief, R&A and Redman interfered with the

relationship by representing to Wal-Mart that R&A was the sole supplier of the quads and

Winston was no longer involved, and that they could provide the quads using the same

box design (which was the design covered by the ‘903 Patent).

63. The actions of R&A and Redman were intentional, as they desired to

interfere or were substantially certain that the actions would interfere with the business

relationship.

64. The interference was neither justified, privileged, or excusable.

65. As a direct and proximate result of the interference by R&A and Redman,

Winston has suffered damages, including but not limited to loss of the value of the

contracts with Wal-Mart and those due Winston in the future.

66. The conduct of R&A and Redman was intentional, malicious, willful,

wanton, and in gross disregard of the rights of Winston, and with the intent to injure

Winston. Accordingly, Winston is also entitled to punitive damages.

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COUNT NINE – INJUNCTIVE RELIEF


by reference.

68. Winston asks the Court to issue a preliminary injunction against all

Defendants from further infringement of Winston’s patents.

69. Additionally, “Black Friday” 2012 will occur the same week this lawsuit

is filed, and will constitute a large percentage of all toy sales for the entire year. Unless

enjoined, payment will be made from Wal-Mart to R&A and/or Redman to settle their

account, likely within thirty (30) days of the sales. Therefore, Winston requests the Court

to enter an Order requiring any such payments to be placed into an escrow account and

not paid to R&A and/or Redman until the outcome of this lawsuit has been decided.

CLAIMS FOR RELIEF

WHEREFORE, premises considered, Plaintiff Winston Company, Inc., requests

judgment in its favor as follows:

a) Judgment that one or more claims of United States Patent No. D666,903 have been infringed, either literally and/or under the doctrine of equivalents, by Redman & Associates, LLC and/or by others to whose infringement Redman & Associates, LLC has contributed or induced;

b) Judgment that one or more claims of United States Patent No. D666,903 have been infringed, either literally and/or under the doctrine of equivalents, by Melvin Redman and/or by others to whose infringement Melvin Redman has contributed or induced;

c) Judgment that one or more claims of United States Patent No. D666,903 have been infringed, either literally and/or under the doctrine of equivalents, by Wal-Mart Stores, Inc.;

d) Enjoin Redman & Associates, LLC from infringement of Winston Company, Inc.’s patent;

e) Enjoin Melvin Redman from infringement of Winston Company, Inc.’s patent;

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f) Enjoin Wal-Mart Stores, Inc. from infringement of Winston Company, Inc.’s patent;

g) Order any payments scheduled to be made by Wal-Mart Stores to Redman & Associates, LLC and/or Melvin Redman now or in the future to be instead paid into an escrow account pending the outcome of this litigation;

h) Award actual damages against Melvin Redman and/or Redman & Associates, LLC for breach of the Teaming Agreement;

i) Award actual damages against Melvin Redman and/or Redman & Associates, LLC for intentional interference with Winston Company, Inc.’s business relationship with Wal-Mart Stores, Inc.;

j) Award punitive damages against Melvin Redman and/or Redman & Associates, LLC;

k) Award damages for patent infringement of no less than a reasonable royalty as provided by 35 U.S.C. § 284;

l) Grant Winston Company, Inc., pre-judgment and post-judgment interest on the damages caused to it by reason of the Defendants’ infringing activities and other conduct complained of herein;

m) Declare this an exceptional case and award Winston Companies, Inc. enhanced damages, its reasonable attorney fees and costs in accordance with 35 U.S.C. § 285; and

n) Award such further relief as the Court may deem just and proper, including but not limited to supplemental damages and/or an accounting for any infringing acts not covered by any damages verdict entered in this action.

Respectfully submitted, _/s/ J. Christopher Davis_________ J. Christopher Davis, OBA No. 16639 Jonathan Cartledge, OBA No. 19062 JOHNSON & JONES, P.C. 2200 Bank of America Center 15 West Sixth Street Tulsa, Oklahoma 74119-5416 Telephone: (918) 584-6644 Fax: (888) 789-0940 ATTORNEYS FOR PLAINTIFF WINSTON COMPANY, INC.

JURY TRIAL DEMANDED