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GEOMC Co., Ltd. v. Competitive Technologies, Inc.

United States District Court, D. Connecticut

September 29, 2017

GEOMC CO., LTD., Plaintiff,
v.
CALMARE THERAPEUTICS, INCORPORATED, Defendant.

          MEMORANDUM AND ORDER

          VICTOR A. BOLDEN, UNITED STATES DISTRICT JUDGE

         GEOMC Co., Ltd. (“Plaintiff, ” or “GEOMC”) brought this case against Calmare Therapeutics, Incorporated (“Defendant, ” or “CTI”), claiming that CTI failed to pay for or return certain medical devices that GEOMC manufactured and supplied to CTI. Complaint, ECF No. 1; Sec. Am. Compl., ECF No. 137. The parties filed proposed findings of fact and conclusions of law on September 20, 2017, and the Court held a bench trial from September 25, 2017 through September 26, 2017. During the course of this trial, two witnesses testified and 22 exhibits were admitted into evidence.[1]

         The Court now sets forth its findings of fact and conclusions of law under Federal Rule of Civil Procedure 52(a)(1), and, as explained below, finds for Plaintiff. CTI is ordered to pay $4, 673, 406 plus interest at the rate of eighteen (18%) per annum from December 31, 2010 to the date of the entry of judgment in this case. CTI also must pay attorney's fees and costs to be determined based on filings to be filed, as provided below.

         If CTI fails to make full payment by December 31, 2017, CTI is ordered to return all remaining devices in its possession to GEOMC. GEOMC may sell the returned devices and apply the proceeds towards the satisfaction of CTI's judgment. Once CTI's judgment has been satisfied by these sales, any devices that have not been sold must be returned to CTI and any proceeds above and beyond the amount necessary to satisfy the monetary judgment above also shall be provided to CTI.

         I. FINDINGS OF FACT[2]

         GEOMC, formerly known as Daeyang E&C Co., Ltd., is a South Korean corporation that manufactures, distributes and sells medical devices. Summ. J. Ruling at 2, ECF No. 187. Calmare Therapeutics, Incorporated (“CTI”), formerly known as Competitive Technologies, Inc., is a Delaware corporation with its principal place of business in Connecticut. Id. A substantial portion of GEOMC's business involves certain pain management devices (“devices”).

         Beginning in 2007, GEOMC and CTI entered into an agreement whereby GEOMC would manufacture and supply devices to CTI in exchange for payment. Id. at 2-7. CTI, however, failed to make full payment for those devices. Id. at 23. As explained in further detail below, CTI now owes GEOMC a total of $4, 673, 406 for the unpaid devices, plus interest and attorney's fees and costs.

         A. 2007 Agreement and Subsequent Amendments

         In October 2007, GEOMC and CTI entered into a “Territory Exclusive License Agreement for Intellectual Property” (“2007 Agreement”). Id.; 2007 Agreement, Pl. Ex. 1. Under the terms of this contract, GEOMC agreed to manufacture devices and supply them to CTI in exchange for payment. Id.

         The language of the 2007 Agreement explicitly provides for profit-sharing between GEOMC and CTI in connection with sales of the devices: “DAEYANG [(GEOMC)] and CTT [(CTI)] will share profits of 50% each from sales of Licensed Products produced by DAEYANG.” Pl. Ex. 1 at ¶ 3.2. The agreement also provides that “[p]ayments of royalties shall be made in United States Dollars within thirty (30) days following the end of each monthly royalty period, and such payments shall include all royalties that have accrued during said monthly period.” Id. at ¶ 4.2. Under the 2007 Agreement, therefore, CTI is obligated to pay GEOMC 50% of the sale price of any devices sold at the end of each month. Id.

         1. Amendments to 2007 Agreement and Timing of Payment

         Seung Bun Oh, Executive Vice President of GEOMC, testified at trial that, although the terms of the 2007 Agreement clearly provided for 50/50 profit-sharing between the parties, the terms remained ambiguous as to the exact mechanism for payment. The agreement is silent, for example, as to how the sales price would be determined, or when sales must be made. In order to bring more clarity to the payment arrangement between the parties, Mr. Oh entered into negotiations on behalf of GEOMC with John Nano, then Chief Executive Officer (“CEO”) of CTI.

         As a result of those negotiations, the parties entered into a Memorandum of Understanding (“MOU”) in January 2010 (“2010 MOU”), which modified the payment mechanism outlined in the 2007 Agreement. 2010 MOU, Pl. Ex. 2. The written terms of the 2010 MOU provide that “GEOMC will receive $9, 000 for the sale of each unit” instead of receiving a fifty per cent share of sale proceeds. Id. The 2010 MOU was signed by John B. Nano, CTI's President and CEO at the time, and Young H. Lim, GEOMC's President and CEO at the time. Id.

         While the specific timing of payment is not written into the language of the 2010 MOU, Mr. Oh testified that he discussed the timing of payment with Mr. Nano during the course of negotiations. He testified that the parties mutually understood and agreed that the $9, 000 flat fee per device would be paid upon delivery of the devices, not upon sale.[3] Mr. Oh further confirmed that the parties never agreed to allow CTI to retain the devices indefinitely.

         The following year, in April 2011, GEOMC and CTI entered into an additional agreement, which increased the price from $9, 000 per device to $10, 000 per device. Summ. J. Ruling at 4, ECF No. 187. Mr. Oh testified that this second MOU did not change the parties' mutual understanding that payment was due upon delivery of the devices. This second adjustment to the 2007 Agreement was negotiated between Mr. Oh and Johnnie Johnson, who had replaced John Nano as CTI's CEO at the time. Although it was never memorialized in a written agreement, neither party disputes that the 2007 Agreement was updated in 2011 to increase the price per unit from $9, 000 to $10, 000. Id.

         2. CTI ...


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