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Lego A/S and Lego Systems, Inc. v. Best-Lock Construction Toys, Inc.

United States District Court, D. Connecticut

January 18, 2017

LEGO A/S and LEGO SYSTEMS, INC., Plaintiffs,
LEGO A/S and LEGO SYSTEMS, INC., Counterclaim Defendants.



         On October 14, 2011, Plaintiffs LEGO A/S and LEGO Systems, Inc. (collectively "Lego" or Plaintiffs) initiated this action, alleging infringement of two copyrights filed in 1994, VA 655-104 and VA 655-230 (the "Minifigure Copyrights"). The Complaint, as amended on August 30, 2012, alleges that Defendants Best-Lock Construction Toys, Inc. and Best-Lock Limited, Hong Kong (collectively "Best-Lock") infringed the Minifigure Copyrights through its actions producing and selling similar minifigures in the United States. Specifically, Lego asserts claims for (1) infringement of the Minifigure Copyrights under 17 U.S.C. § 101, et seq.; (2) defamation; and (3) violation of the Connecticut Unfair Trade Practices Act ("CUPTA"), Conn. Gen. Stat. § 42-110a, et seq. Second Amended Complaint (Doc. 84). Lego seeks to enjoin and restrain Best-Lock from manufacturing or selling its minifigures, and asserts claims for its "actual damages" caused by the alleged infringement and for the award of Best-Lock's profits generated thereby. Id. at 10-11.

         For its part, Best-Lock has asserted several affirmative defenses and Counterclaims claiming, inter alia, that (1) the Minifigure Copyrights are invalid and unenforceable; (2) Best-Lock is entitled to a declaratory judgment that the sale of Best-Lock's minifigures does not infringe on the Minifigure Copyrights; and (3) Best-Lock is entitled to an injunction requiring Lego to consent to the importation and delivery of Best-Lock's goods in the United States. Best-Lock Answer (Doc. 86). Best-Lock also added Best-Lock Group Limited as a Counterclaim Plaintiff. Id. ¶ 87.

         The Court has previously decided several motions and disputes between the parties. Familiarity with those earlier rulings is assumed. The Court denied motions for preliminary and permanent injunctions sought by both parties, without prejudice to renewal after discovery and after assessing the need for a further evidentiary hearing. 874 F.Supp.2d 75 (D. Conn. 2012) ("Lego I"). The Court subsequently granted Lego's motion to join Best-Lock Hong Kong as a Defendant, but denied Lego's motion to add Torsten Geller as a Defendant. 886 F.Supp.2d 65 (D. Conn. 2012) ("Lego II"). Thereafter, the Court settled a dispute between the parties regarding the terms of a Protective Order governing the action, 2012 WL 6156129 (D. Conn. Dec. 11, 2012) ("Lego III"), a ruling the Court subsequently declined to reconsider, 2013 WL 1611462 (D. Conn. April 15, 2013) ("Lego IV").

         Prior Court orders had considered and adjudicated the proper conduct of mutual pretrial discovery, which gave every indication of being complex in nature and global in scope. To all outward appearances, the discovery aspect of the case had been going on apace when, on March 16, 2016, Best-Lock changed the litigation focus dramatically by filing pursuant to Fed.R.Civ.P. 41(b) a Motion to Dismiss Lego's Second Amended Complaint (Doc. 84), based on Lego's asserted failure to prosecute the action. The parties have fully briefed that Motion. Best-Lock filed a Memorandum of Law in Support of the Motion ("Best-Lock Dismiss Br.") on March 16, 2016 accompanied by an Affidavit of Lawrence S. Rosenthal ("Rosenthal Dismiss Aff.") with twenty-six exhibits attached and an affidavit of Torsten Geller ("Geller Dismiss Aff.") with two additional exhibits attached.[1] Doc. 128. Lego filed a Memorandum in Opposition to the Motion ("Lego Dismiss Br.") accompanied by an Affidavit of Elizabeth A. Alquist ("Alquist Dismiss Aff.") with twenty-three exhibits attached. Doc. 129. Best-Lock thereafter filed a Reply Memorandum in Support of the Motion ("Best-Lock Reply Br.") and additional exhibits. Docs. 133-34.

         While this Motion to Dismiss by Best-Lock was pending, Lego filed a Motion for Partial Summary Judgment as to liability for its infringement claims under Count One of its Second Amended Complaint, as well as on several of Best-Lock's affirmative defenses and Counterclaims. Docs. 130-32. Best-Lock then filed an Emergency Motion to Deny, Dismiss or Stay Lego's Motion for Partial Summary Judgment ("Emergency Motion") with a supporting memorandum of law ("Emergency Motion Br.") and affidavit in support of its Emergency Motion ("Rosenthal Rule 56(d) Aff."), arguing that Lego's Motion for Partial Summary Judgment should be denied or stayed in light of the fact that Best-Lock's Motion to Dismiss was pending. Doc. 135. Best-Lock also purported to make that Emergency Motion pursuant to Rule 56(d), which authorizes the district court to issue an "appropriate order" when the nonmovant for summary "cannot present facts essential to justify its opposition." Fed.R.Civ.P. 56(d).

         The Court initially granted Best-Lock's Emergency Motion, denying Lego's Motion for Summary Judgment without prejudice to refiling once the Motion to Dismiss was resolved. Doc. 136. Lego sought reconsideration of the Court's Doc. 136 Order ("Lego Reconsider Br."). Doc. 137. As a result, the Court vacated its Doc. 136 Order and stayed the requirement for Best-Lock to file an opposition to partial summary judgment in favor of Lego until the Court decided Lego's Motion to Reconsider. Doc. 139. Best-Lock then filed an opposition to Lego's Motion to Reconsider ("Best-Lock Reconsider Br."). Doc. 141. Lego filed a reply brief in support of its Motion to reconsider ("Lego Reply Br."). Doc. 142.

         Out of this welter of motion activity, two motions presently ripe for decision emerge: Best-Lock's Motion to Dismiss Lego's Second Amended Complaint; and Lego's Motion for Reconsideration of the Court's Order staying Lego's Motion for Partial Summary Judgment until Best-Lock's Motion to Dismiss has been adjudicated. This Ruling resolves those two pending motions.

         I. Background and Procedural History

         I begin with a background and procedural history that is applicable to both motions.

         Lego first filed a Complaint in this action against Best-Lock on October 14, 2011. Doc. 1. Lego has manufactured toys called "minifigures" since 1978. These minifigures depict people, each with a cylindrical head, cylindrical neck, a trapezoidal torso, bent arms, hooked hands and square block-like feet. Each is designed so that the user can disassemble them and attach them to other figures and to studded blocks. All the minifigures have the same shape but vary in the two-dimensional representations of facial features and clothing styles on the torso and head respectively. In 1994 Lego registered its Minifigure Copyrights with the United States Copyright Office.

         Best-Lock has been selling its own minifigures in the United States since 1998. These minifigures can also be attached to studded blocks and are the same size as Lego's, with cylindrical heads, cylindrical necks, trapezoidal torsos, bent arms, hooked hands and square block-like feet. The minifigures differ in color and also in the two-dimensional representations of facial features and clothing. Other companies such as Hasbro, Inc. and Mega Brands, Inc. Create and sell similar minifigures.

         On or about July 14, 2011, the U.S. Customs and Border Protection Service ("CBP"), at the behest of Lego, carried out the first of a series of seizures of shipments from abroad of Best-Lock's toy blocks and minifigures. The CBP, administratively echoing Lego's principal allegation in the case, asserted that such a seizure occurred because Best-Lock's minifigures infringed Lego's '104 copyright. Best-Lock petitioned to have CBP release the shipments and cease the seizures, to no avail. Best-Lock's initial efforts to liberate its minifigures did not succeed.

         Best-Lock filed an Answer to Lego's initial Complaint on January 5, 2012 and asserted certain counterclaims against Plaintiffs. Doc. 25.[2] Best-Lock amended this Answer and Counterclaims on February 6, 2012 and moved for a Preliminary Injunction against Lego. Docs. 35, 37.[3] Lego filed an Amended Complaint on February 13, 2012, Doc. 40, and sought to join two additional Defendants to this action, Docs. 44-45. Best-Lock twice sought extensions for its time to respond to the Amended Complaint, Docs. 42, 47, both of which this Court granted, Docs. 46, 49 in February 2012. The parties both sought extensions to respond to discovery requests in March 2012. Docs. 56-57.

         The parties fully briefed Best-Lock's motion for a Preliminary Injunction. Docs. 37, 43, 52. The Court held a hearing on Best-Lock's motion, as well as on Lego's motion to join two additional Defendants on March 8, 2012. Doc. 60. Best-Lock subsequently filed a partial opposition to Lego's motion to join additional Defendants and Lego filed a reply brief in support. Docs. 63, 71. The Court requested supplemental briefing related to Best-Lock's motion for a Preliminary Injunction, Doc. 74, which the parties filed on May 11, 2012, Docs. 75-76. The Court also granted Lego an extension to respond to Best-Lock's discovery requests on May 15, 2012. Doc. 78.

         On July 11, 2012, the Court denied Best-Lock's motion for a Preliminary Injunction, 874 F.Supp.2d 75 (Lego I). On August 20, 2012, the Court granted in part and denied in part Lego's motion to join two additional Defendants, 886 F.Supp.2d 65 (Lego II). Thereafter, Lego filed a corrected Second Amended Complaint, Doc. 84, which Best-Lock filed an Answer and Counterclaims to on September 13, 2012, Doc. 86. Lego filed an Answer to these Counterclaims on October 4, 2012. Doc. 92. The parties each moved for a Protective Order in the fall of 2012. Docs. 90-91, 93-94. The Court granted in part and denied in part each of these motions in December 2012, 2012 WL 6156129 (Lego III). Lego requested and was granted more time to file for reconsideration of that Ruling. Docs. 100-101. In April 2013, the Court denied reconsideration of its Ruling on the Protective Order, 2013 WL 1611462. In May 2013, the Protective Order issued in this action. Doc. 110.

         On May 20, 2014, the Court directed counsel to send simultaneous letters on June 12, 2014 updating the Court on the status of the case and recommending how the case should proceed. Doc. 113. In that Order, the Court recognized that the case had become "somewhat like a sleeping volcano, " id. at 1, and inquired as to the impact of the Supreme Court's decision in Petrella v. Metro-Goldwyn Mayer, Inc., 134 S.Ct. 1962 (2014) on the parties' discovery, Doc. 113 at 3. Petrella, which resolved a conflict between circuits, held that laches cannot be invoked to preclude adjudication of a claim for damages for copyright infringement brought within the three-year window of the applicable statute of limitations for such claims. Id. That holding directly impacted the case at bar, because this Court had previously concluded that laches did apply in the copyright context, and that more discovery between the parties on laches-related issues was necessary to a decision on a preliminary or permanent injunction. The parties submitted letter briefs to the Court, and the Court held a telephonic conference to further discuss the pending discovery issues. Docs. 115-117. At the conference, the parties disputed whether discovery should be bifurcated, with Best-Lock seeking to bifurcate discovery so as to limit it initially to its defense of equitable estoppel. The Court reserved a decision on bifurcation.

         On March 23, 2015, the Court directed that counsel for each party file letters detailing the status of the case and attend a telephonic status conference. Doc. 118. The Court held another telephonic conference on April 9, 2015, and on April 15, 2015 issued a ruling directing that discovery would not be bifurcated. Doc. 120. The Court directed counsel to file further status reports on October 15, 2015. Id. at 3. The parties agreed after this Ruling that prior discovery requests would be deemed abandoned and the only operative requests going forward would be newly propounded requests. Lego Dismiss Ex. J. Each party subsequently moved for extensions of time to respond to certain discovery requests, which the Court granted. Docs. 123-24, 126-27. When the parties filed their letters updating the Court on the status of the case, it was clear that the parties were continuing to attempt to resolve ongoing discovery disputes. See, e.g., Lego Dismiss Ex. D. This was confirmed by the extensive correspondence between the parties filed with the Court related to this motion. That correspondence extended from September 14, 2015 through December 23, 2015. Lego Dismiss Exs. K-V.

         On March 16, 2016, Best-Lock filed the instant Motion to Dismiss, based on Lego's asserted failure to prosecute. Doc. 128. On April 13, 2016, before Best-Lock's Motion to Dismiss was fully briefed and while it was still pending, Lego filed its Motion for Partial Summary Judgment, Docs. 130-32. As noted supra, the Court initially granted Best-Lock's Emergency Motion to deny this Motion for Partial Summary Judgment without prejudice to refiling for good cause shown under Federal Rule of Civil Procedure 56(d). Lego has sought reconsideration of this decision. That is the second of the two pending motions resolved by this Ruling.

         The Court now turns to consideration of Best-Lock's Motion to Dismiss, and then to Lego's Motion to Reconsider.

         II. Motion to Dismiss for Failure to Prosecute

         A. Standard of Review

         Federal Rule of Civil Procedure 41(b) provides that "[i]f the plaintiff fails to prosecute or to comply with these rules or a court order, a defendant may move to dismiss the action or any claim against it." The Supreme Court perceives the value of this rule to be that it prevents "undue delays" and "congestion in the calendars of the District Courts." Link v. Wabash R.R. Co., 370 U.S. 626, 629-30 (1962). The authority of a district court to dismiss an action on one or another of these grounds "cannot seriously be doubted" and can be done sua sponte by a district judge. Id. at 630-31. Pursuant to the law of this Circuit, five factors must be weighed by this Court in considering a Rule 41(b) dismissal: "(1) the duration of the plaintiff's failure to comply with the court order, (2) whether plaintiff was on notice that failure to comply would result in dismissal, (3) whether the defendants are likely to be prejudiced by further delay in the proceedings, (4) a balancing of the court's interest in managing its docket with the plaintiff's interest in receiving a fair chance to be heard, and (5) whether the judge has adequately considered a sanction less drastic than dismissal." Baptiste v. Sommers, 768 F.3d 212, 216 (2d Cir. 2014) (quoting Lucas v. Miles, 84 F.3d 532, 535 (2d Cir. 1996)) (internal quotation marks omitted). "No single factor is generally dispositive." Id. (citing Nita v. Conn. Dep't of Envtl. Prot., 16 F.3d 482, 485 (2d Cir. 1994)).

         While dismissals under Rule 41(b) are reviewed for abuse of discretion, the Second Circuit has stressed that it is "'the harshest of sanctions'" and "insist[ed] that dismissal 'be proceeded[4] by particular prerequisites, ' including 'notice of the sanctionable conduct, the standard by which it will be assessed, and an opportunity to be heard.'" Id. at 217 (quoting Mitchell v. Lyons Prof'l Servs., Inc., 708 F.3d 463, 467 (2d Cir. 2013)). Indeed, even where the court issues a notice of possible dismissal and a plaintiff does not comply with the court's directive, "the court must still make a finding of 'willfulness, bad faith, or reasonably serious fault' by evaluating those criteria." Id. (quoting Mitchell, 708 F.3d at 467). Moreover, the Second Circuit has instructed that dismissal "should be used in only extreme situations." Id. (quoting Mitchell, 708 F.3d at 467) (internal quotation marks omitted).

         B. Discussion

         As a preliminary matter, the Court notes that in their briefs on this motion, counsel have disputed with an asperity bordering on ad hominem the procedural history of this litigation, numerous facts related to Lego's and Best-Lock's alleged delay and failures, and discovery issues that have apparently been festering in this litigation for years. Indeed, those latter disputes run through the present briefs to such an extent Best-Lock felt it necessary to remind the Court at the outset of its motion to dismiss that "[t]o be clear, this motion is not a motion for an Order related to discovery." Best-Lock Dismiss Br. at 2.

         That distinction is worth drawing, because a motion to dismiss a complaint for failure to prosecute is not the appropriate vehicle to litigate discovery issues encountered by either side. To the extent the disputes are relevant to any alleged delay, the Court will take that into account. Otherwise, both parties were, and are still, free to bring motions related to these discovery failures before the Court. Because they have chosen not to do so at this point, the Court has no occasion to, and does not determine, what discovery should or should not have happened. The Court will now analyze each of the factors recited in Baptiste to determine whether a Rule 41(b) dismissal should be granted.

         1. Duration of Delay

         "The first factor to be examined breaks down into two parts: (1) whether the failures to prosecute were those of the plaintiff, and (2) whether those failures were of significant duration." U.S. ex rel. Drake v. Norden Systems, 375 F.3d 248, 255 (2d Cir. 2004) (citation omitted).

         A motion asserting a failure to prosecute requires a two-part inquiry: (1) whether the failures to move the case forward were ascribable to the party plaintiff, here Lego; and (2) whether those failures were of a duration sufficient to warrant the ultimate sanction of dismissal. See Id. In complex and strenuously contested cases, such as this one pitting Lego against Best-Lock and vice versa, it is not uncommon for the litigation to progress in fits and starts over dams and obstructions, rather than flowing as a smooth and steady stream. The trial judge's function in Rule 41(b) practice is to ascribe responsibility for delay to one party, or to the other, or to both, or to neither. "The question we must ask with respect to duration is simply whether or not the delay was caused by plaintiff's side as a whole." Id.

         There were several periods of inactivity throughout this time-consuming litigation that warrant discussion and further analysis. The first interval, when the battle fleets were drawn up but appeared on the surface to be becalmed, occurred from the Court's entry of the Protective Order on May 13, 2013 until May 20, 2014 when the Court ordered the parties to update it on the status of the litigation. Docs. 110, 113.[5] Thus, the delay was for just over a year. Notably, neither the Court nor the Clerk warned Lego that failing to continue to prosecute the case at that juncture could lead to dismissal of the case. Instead, in its May 20, 2014 order the Court sought only an update on the status of the case and to assist in moving the case along, in light of the recent Supreme Court decision in Petrella. Doc. 113.

         At that point, both parties represented that they had been engaging in settlement negotiations, which according to Lego were taking place on a global scale. Lego Dismiss Ex. A at 1 (June 12, 2014 letter from Best-Lock stating "[t]he parties are actively pursuing settlement"); Lego Dismiss Ex. B at 1 (June 12, 2014 letter form Lego stating "[s]ince this Court's July 11, 2012 Ruling on defendant's Motion for Preliminary Injunction [Doc. 79], the parties have engaged in extensive global settlement negotiations lead by counsel for the parties in Germany"). The Court recognized in its June 17, 2014 Order, Doc. 115, that the parties had stated the settlement negotiations had occurred "with differing degrees of emphasis." Id. at 1. Best-Lock emphasizes that it had made the settlement offer to Lego and Lego had never even responded. Best-Lock Dismiss Br. at 11; Best-Lock Reply Br. at 5. Best-Lock, therefore, faults Lego for this entire period of delay, a charge Lego vehemently denies. Lego Dismiss Br. at 3-5. In any event, although this period of delay is ...

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