Trademark Trial and Appeal Board Electronic Filing System. http://estta.uspto.gov
`ESTTA689784
`ESTTA Tracking number:
`08/17/2015
`
`Filing date:
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`92058149
`Plaintiff
`German Sport Guns GmbH
`JASON M SNEED
`SNEED PLLC
`610 JETTON ST STE 120-107
`DAVIDSON, NC 28036
`UNITED STATES
`jsneed@sneedlegal.com, sarah@sneedlegal.com, litigation@sneedlegal.com,
`trademarks@sneedlegal.com
`Response to Board Order/Inquiry
`Sarah C. Hsia
`sarah@sneedlegal.com, jsneed@sneedlegal.com
`/sch/
`08/17/2015
`Reply to Order to Show Cause.pdf(142060 bytes )
`Exhibit O.pdf(1698261 bytes )
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`Proceeding
`Party
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`Correspondence
`Address
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`Submission
`Filer's Name
`Filer's e-mail
`Signature
`Date
`Attachments
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`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
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`In the matter of Trademark Registration No. 3,872,900
`Registered: November 9, 2010
`Trademark: MP5
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`German Sport Guns GmbH,
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`Petitioner,
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`Heckler & Koch GmbH,
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`Respondent.
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`Cancellation No. 92058149
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`PETITIONER’S REPLY TO RESPONDENT’S RESPONSE
` TO ORDER TO SHOW CAUSE
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`I. The Void Ab Initio Doctrine Applies in Equal Force to Intent to Use Applications
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`Respondent’s argument that its §66A application somehow escapes being void ab initio
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`because it is an intent-to-use application must be rejected. The American Forests case, cited by
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`Petitioner in its Response to the Order to Show Cause (TTABVUE 33), is a precedential opinion
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`of the Board that stands for the proposition that intent-to-use applications are equally subject to
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`being found void ab initio. American Forests v. Barbara Sanders, 54 U.S.P.Q.2d 1860, 1999
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`WL 1713450, *3 (TTAB 1999) (holding that the void ab initio doctrine applies equally to use
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`based and intent-to-use applications). In the American Forests case, the question was whether
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`the applicant, an individual, had a bona fide intent to use the mark, or whether the intention was
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`that the mark be used by a partnership consisting of the applicant and her husband. Similarly,
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`here, the issue is whether Respondent had a bona fide intent to use the MP5 mark in connection
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`1
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`with firearms in IC013 when it unequivocally knew that the mark was owned by another entity in
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`the United States.
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`Respondent simply cannot be said to have had a bona fide intent to use a mark that it
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`knew was owned by another. Respondent itself admits that: i) it knew that mark was owned by
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`another entity because HKI filed the application that matured into the ‘109 Registration “at the
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`request, and with the authorization, of Respondent” (TTABVUE 34, p. 5); and ii) that, despite
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`Respondent’s claims that HKG owned the mark all along in the United States, both HKG and
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`HKI believed that an assignment was required to formally transfer ownership of the ‘109
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`Registration from HKI to HKG. In other words, the fact of HKI’s ownership of the MP5 mark
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`for firearms in IC013 and the corresponding ‘109 Registration at the time of HKG’s application
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`that matured into the ‘900 Registration is evidenced by the fact that it required an assignment to
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`transfer such ownership from one party to another. For this reason, per American Forests,
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`Respondent is not exempt from the application of the void ab initio doctrine with respect to the
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`‘900 Registration initially filed in the U.S. under the Madrid Protocol. And indeed,
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`Respondent’s own admissions and statements show that it did not – and could not – have had a
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`bona fide intent-to-use the mark in commerce at the time of filing of the Madrid Protocol
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`application that matured into the ‘900 Registration, because it knew that the mark was owned by
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`another entity in the United States. Because Respondent was not the owner of the MP5 Mark for
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`firearms in IC013 in the United States at the time of filing of the application that matured into the
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`‘900 Registration, that registration is thus void ab initio.
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`II. There is a Real Controversy between Petitioner and Respondent concerning the MP5
`Mark
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`Respondent’s argument that only a party that has an ownership claim to a trademark may
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`challenge the registration of such mark is ludicrous and completely unsupported by the Lanham
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`2
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`Act, or the case law cited by Respondent itself. The Lanham Act is clear that “any person who
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`believes that he is or will be damaged” may make a claim for cancellation of a registration, and it
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`does not restrict the grounds for seeking cancellation on the grounds of ownership to parties who
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`have an ownership claim. 15 U.S.C §1064 (emphasis added). The Ritchie case cited by
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`Respondent at TTABVUE 34, p. 7 confirmed the standing of an unrelated individual to bring an
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`opposition proceeding where the individual believed that he would be harmed by the
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`“disparagement of his alleged belief in a loving and nurturing relationship between husband and
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`wife” if the mark was to be afforded registration. Ritchie v. Simpson, 170 F.3d 1092, 1097 (Fed.
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`Cir. 1999). Petitioner is thus not required to show that it has any ownership interest in the MP5
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`mark; only that it is or will be damaged by the continued registration thereof.
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`“For purposes of ruling on a motion to dismiss… [the Board] must accept as true all well-
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`pled and material allegations of the complaint, and must construe the complaint in favor of the
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`complaining party.” Id.; see also Ashcroft v. Iqbal et al., 556 U.S. 662, 678 (2009). Here,
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`Petitioner has clearly stated in its Amended Petition for Cancellation that it is likely to be
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`damaged by continuance of the ‘900 Registration due to Respondent’s “maintenance of litigation
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`against Petitioner, and its litigation focus on Petitioner’s legitimate use of the MP5 term,” giving
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`Petitioner a “reasonable apprehension that Respondent may attempt to assert the ‘900
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`Registration against Petitioner in the future.” TTABVUE 13, ¶ 12. Accepting these allegations
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`as true, there is no question that Petitioner has clearly and validly stated allegations
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`demonstrating that there is a real controversy between the parties concerning the ‘900
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`Registration. In further support thereof, in its Response to the Order to Show Cause, Petitioner
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`cited to a settlement demand made by Respondent in the SDIN Litigation that purported to
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`require, as a condition for settlement, that Petitioner withdraw the instant Cancellation
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`3
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`Proceeding with prejudice, and “acknowledge the validity of [HKG]’s rights in the MP5 word
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`mark…as well as the validity of all HK intellectual property identified…above” (which included
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`“any now existing registered or common law trademark or trade dress of [HKG]…including but
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`not limited to…(ii) MP5”). TTABVUE 33, Exhibit D.1 Petitioner has, and has pled, facts and
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`allegations showing that it has a real interest in the proceeding, that it stands to be damaged by
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`the continued registration of the ‘900 Registration by virtue of Respondent’s continued threat of
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`litigation, and that it is not a mere intermeddler. Petitioner’s standing to bring this claim for
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`cancellation against Respondent should thus be upheld by the Board.
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`III. Respondent’s Likelihood of Confusion Argument is Without Merit
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`Respondent’s argument that Petitioner’s claim is “a likelihood of confusion claim dressed
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`up as lack-of-ownership claim [sic]” is a bizarre attempt to distract from the merits of this
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`cancellation proceeding and should be outright rejected. Likelihood of confusion analysis is
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`apposite in determining the registrability or infringement of two marks which indicate different
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`sources of similar or identical goods. See, e.g., Teledyne Techs., Inc. v. Western Skyways, Inc.,
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`78 U.S.P.Q.2d 1203 (TTAB 2006) (“The issue, of course, is…whether there is a likelihood of
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`confusion as to the source of the goods.” (citing In re Rexel Inc., 223 U.S.P.Q. 830 (TTAB
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`1984))); cf. UVeritech, Inc. v. Amax Lighting, Inc., Cancellation No. 92057088, at *4-6 (TTAB
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`2015) (noting that, although the underlying claim was brought under Section 2(d), the underlying
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`dispute centered on ownership of the mark (citing Nashin v. Product Source Int’l LLC, 107
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`U.S.P.Q.2d 1257, 1258 (TTAB 2013)). Here, Respondent goes to great lengths in its paper to
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`make statements supporting the idea that HKG is – and always has been – the sole source of
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`1 Petitioner notes that this settlement demand was made after the instant Cancellation Proceeding approximately a
`year after filing its Amended Petition for Cancellation, and to the extent that the Board finds that Petitioner ought to
`have pled facts and allegations pertaining thereto in its petition, Petitioner respectfully requests leave to amend to
`include such facts and allegations.
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`4
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`firearms sold under the MP5 mark in the United States and elsewhere. See, e.g., TTABVUE 34,
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`p. 3 (“Respondent developed the MP5 firearm in the 1960s and has been continuously
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`manufacturing and selling MP5 firearms in the United States for over forty years, through itself,
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`its subsidiaries and its licensees.”); p. 5 (“At all material times (since the June 1, 1099 filing
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`date) Respondent was the sole manufacturer of ‘MP5’ trademarked firearms….for the entire life
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`of both the ‘109 Registration and the common law use that preceded it, Respondent – not HK
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`Inc. – was the party the consuming public believed stood behind the product.”).
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`The Lanham Act of 1946 defines a “trademark” as “any word…used by a person…to
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`identify and distinguish his or her goods, including a unique product, from those manufactured or
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`sold by others and to indicate the source of the goods, even if that source is unknown.” Lanham
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`Act § 45, 15 U.S.C. § 1127 (emphasis added). Here, according to Respondent itself, there
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`allegedly is and has only ever been one source of MP5 firearms in the United States: HKG.
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`There can thus only be one trademark for MP5 for firearms in the United States, and a likelihood
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`of confusion analysis is wholly inapposite. Moreover, when the alleged use of same mark for the
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`same goods by two parties is at issue, likelihood of confusion is inevitable. See UVertitech,
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`Cancellation No. 92057088, at *5-6 (TTAB 2015). The question that remains is: who owned the
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`MP5 trademark in the United States at the time of filing of the application that matured into the
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`‘900 Registration? Petitioner submits that it was HKI, a company that was unrelated to HKG at
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`the time of filing, and the ‘900 Registration is thus void ab initio. Respondent does not address
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`Petitioner’s showing, from Respondent’s own Bond offering, that HKI and HKG undisputably
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`were not related companies from at least 2004 to the second quarter of 2009, as HKI had been
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`divested from any connection with HKG to avoid product liability concerns applicable to the
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`firearm industry. TTABVUE 33, p. 3 and Exhibit A, p. 31.
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`5
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`IV. Respondent’s Fraud
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`In its Order to Show Cause dated June 10, 2015, the Board expressly requested that the
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`Parties address “any related issues the parties would like to present to the Board.” TTABVUE
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`32, p. 3. Petitioner believes that Respondent’s conduct – as well as that of its allegedly “related”
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`company HKI – concerning both statements and misstatements made to the U.S.P.T.O. in
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`connection with both the ‘109 and ‘900 Registrations is related and relevant to this Cancellation
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`Proceeding. Petitioner has not yet alleged fraud as a grounds for cancellation of the ‘900
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`Registration, in no small part because discovery has not even commenced in this proceeding, and
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`Petitioner has not had an opportunity to adduce evidence that would evidence Respondent’s
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`intent, without which it would be unable to plead all of the elements of fraud (specifically, intent
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`to deceive) with the specificity required post-In re Bose. See, e.g., Societe Cooperative
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`Vigneronne des Grandes Caves Richon-le-Zion and Zicron-Jacob Ltd. v. Albrecht-Piazza, LLC,
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`Opposition No. 91190040, 2009 WL 10194584, at *2 (TTAB 2009) (noting that “[p]leadings of
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`fraud made ‘on information and belief’ where there is no separate indication that the pleader has
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`actual knowledge of the facts supporting a claim of fraud also are insufficient”).
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`In a somewhat unusual approach, Respondent is the party here who is characterizing its
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`own actions as fraudulent, in an attempt to ask the Board to ignore Petitioner’s arguments
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`concerning Respondent’s actions surrounding: i) the assignment of the ‘109 Registration from
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`HKI to HKG in 2009 so as to unify ownership of the MP5 mark for firearms in the United States
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`in HKG, and thereby satisfy the Examining Attorney’s objections to registration of the
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`application that matured into the ‘900 Registration, even though those parties were, at that time,
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`unrelated; ii) the Section 8/9 Declaration filed by HKI claiming continued ownership and use
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`almost a year after assigning away the ‘109 Registration; and iii) HKG’s bizarre behavior
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`arguing that the assignment signed on March 19, 2009 was not effective until June 15, 2010
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`(representations made in the SDIN Litigation, and rejected by that Court (see infra)) or June 20,
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`2010 (representations made in this Cancellation Proceeding) – arguments which have been
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`rejected by the SDIN Court, and found to be sanctionable conduct. See Exhibit O (December 24,
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`2010 Order), pp. 16-17 (rejecting Plaintiff’s theory of a later effective date of assignment);
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`TTABVUE 33, p. 16, n. 3 and Exhibit K, pp. 3-4, 13, 16-17. Meanwhile, Petitioner has been
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`consistent in characterizing Respondent’s conduct as either negligent or fraudulent. See, e.g.,
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`TTABVUE 33, pp. 17-18. In any event, the Board requested that the Parties address other
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`related issues, and should not ignore the arguments made by Petitioner as they are contextually
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`relevant and important to understanding Respondent’s course of conduct as relates to the MP5
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`mark in the United States.
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`V. Respondent and HKI were not Related Companies at the Time of Filing
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`Respondent cannot have it both ways. In 2004, HKG divested its HKI subsidiary so as to
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`avoid civil liability for non-military sales of firearms – this statement of fact was uncontested by
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`Respondent, and as such should be deemed to be conceded. See, e.g., Kissi v. Panzer, 664
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`F.Supp.2d 120, 123 (D.D.C.2009) (“Because the plaintiff’s opposition fails to address the
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`defendants’ arguments, the Court may treat the defendants’ motion as conceded.”); American
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`Registry of Radiologic Technologists v. Bennett, 655 F.Supp.2d 944, 946 n. 2 (D.Minn.2009) (“It
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`is well established that a party concedes an issue by failing to address it in an opposing brief.”).
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`Now Respondent argues that it owned the MP5 mark in the United States at all times, including
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`at the time the application that matured into the ‘109 Registration was filed, and after divestment
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`of HKI, even though the registration remained in the name of HKI after divestment. HKG cannot
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`maintain that the companies were separate enough to avoid civil liability, while maintaining that
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`they were related enough for the purposes of ownership of the MP5 mark. And the re-acquisition
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`of HKI by HKG occurred well after the date of the application that matured into the ‘900
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`Registration, which was in 2008. Thus, at the date of the application that matured into the ‘900
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`Registration, HKG and HKI were not related companies.
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`VI. CONCLUSION
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`For the foregoing reasons, Petitioner respectfully requests that the Board find that there is
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`no Cause to dismiss the Cancellation Proceeding for failure to state a claim, or otherwise.
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`Respectfully Submitted,
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`/s/ Sarah C. Hsia
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`Sarah C. Hsia
`Jason M. Sneed
`SNEED PLLC
`610 Jetton St., Suite 120-107
`Davidson, North Carolina 28036
`Tel: 844-763-3347
`sarah@sneedlegal.com
`JSneed@SneedLegal.com
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`Attorneys for Petitioner
`German Sport Guns GmbH
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`Dated: August 17, 2015
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`Certificate of Service
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`Pursuant to C.R.F. §2.119, I hereby certify that a true and correct copy of the foregoing
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`Response to Order to Show Cause was served on the Respondent, Heckler & Koch GmbH, on
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`the 17th day of August 2015 by first-class mail, postage prepaid, addressed as follows:
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`Daniel R. Cooper, Esq.
`Cooper & Kurz
`170 Eden Road
`Stamford, CT 06907-1007
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`/s/ Sarah C. Hsia
`An Attorney for Petitioner
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`9
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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 1 of 95 PagelD #: 6944
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF INDIANA
`INDIANAPOLIS DIVISION
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`HECKLER & KOCH, INC.,
`HECKLER & KOCH GMBH,
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`Plaintiffs,
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`vs.
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`GERMAN SPORT GUNS GMBH,
`AMERICAN TACTICAL IMPORTS, INC.,
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`Defendants.
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`AMERICAN TACTICAL IMPORTS, INC.,
`GERMAN SPORT GUNS GMBH,
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`Counter Claimants,
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`VS.
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`HECKLER & KOCH, INC.,
`HECKLER & KOCH GMBH,
`G. WAYNE WEBER, and
`NIELS IHLOFF
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`ML}/\)%€%§/QI\/§/%/\)\/3%/\)§/Q/€%\)%/\)\)
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`No. 1:1 1-cv-O1 108-SEB-TAB
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`Counter Defendants.
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`ORDER ON PENDING MOTIONS
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`This cause is before the Court on three motions: (1) Defendants’ motion to strike
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`Plaintiffs’ affirmative defenses to counterclaims [Docket No. 282], filed on March 17, 2014; (2)
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`Plaintiffs’ motion for summary judgment [Docket No. 329], filed on July 17, 2014; and (3)
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`Defendants’ motion for summary judgment [Docket No. 331], filed on July 17, 2014. For the
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`reasons set forth below, Defendants’ motion to strike is DENIED as moot, Plaintiffs’ motion for
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`

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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 2 of 95 PagelD #: 6945
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`summary judgment is DENIED in part and GRANTED in part, and Defendants’ motion for
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`summary judgment is DENIED in its entirety.
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`Factual and Procedural Background
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`This matter has been pending on our docket for more than three years, and its antecedent
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`disputes stretch back still fiirther. The array of motions to strike, motions to dismiss, and motions
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`for reconsideration filed by the parties have given us occasion to explore aspects of the case’s
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`factual background, but only now do we arrive at the merits of the intellectual property dispute
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`lying at the core of this sprawling body of litigation. While we have summarized the record
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`previously, we endeavor here to outline the undisputed facts, cognizant that the presence of
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`cross-motions for summary judgment will require us to draw varying inferences from them as we
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`address each of those motions in turn.
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`Plaintiffs Heckler & Koch, Inc. (HK USA) and Heckler & Koch GmbH (HKG) are firms
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`engaged in the manufacture and sale of firearms—headquartered, respectively, in the United
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`States and Germany.‘ Among products sold under the Heckler & Koch name is the “MP5,” a
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`weapon originally designed as a nine millimeter submachine gun by HKG in the 1960s, and
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`which has since become the basis of a “family” of firearms sharing certain core design features;
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`Heckler & Koch first sold the MP5 in the United States in the 1970s. Docket No. 346-5 (Weber
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`Decl.) at 1H] 4, 8; Docket No. 333-5 (HKG “Official History”) at 247-249, 252-264. In 1990, HK
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`USA registered the MP5 as an international class 13 (firearms) trademark with the United States
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`Patent and Trademark Office (“PTO”). Cooper Decl.1] 5. HKG registered the MP5 with the
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`German patent office on June 4, 2008. Id. at 1] 6.
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`' As the caption indicates, HK USA and HKG are, together with individual corporate officers G. Wayne Weber and
`Niels Ihloff, defendants in the counterclaims asserted by GSG and ATI. For the sake of simplicity, however, we will
`refer to HK USA and HKG collectively throughout this Order, where their individual identities often are not
`relevant to the discussion.
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`

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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 3 of 95 PageID #: 6946
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`Defendants are also engaged in the firearms business: Gennan Sports Guns GmbH
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`(“GSG”) is an arms manufacturer based in Gennany, and American Tactical Imports, Inc.
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`(“ATI”) is an arms importer and retailer incorporated and based in New York. Am. Compl. 111] 7-
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`8.2 Two individuals, both executives for the Plaintiff companies, are also parties to this suit:
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`Counterclaim Defendant G. Wayne Weber is the president of HK USA, Docket No. 251 at 1] 5;
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`and Counter Defendant Niels Ihloff3 is a managing director of HKG and consulted HK USA
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`during the 2009 settlement negotiations. Id. at1] 6.
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`A number of the claims and counterclaims in this case are premised on differing
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`interpretations of two parallel series of events that unfolded between 2008 and 2010: first, HK
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`USA’s initial suit against the Defendants (“the 2009 litigation”); and second, HKG’s attempts to
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`obtain a United States trademark registration for the MP5 weapon.
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`HK USA filed suit in the Southern District of Indiana against GSG, ATI, and a third
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`firearms manufacturer, Orion Arms Corporation, on January 13, 2009 alleging trademark
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`infringement, trade dress infringement, and other related claims. See Docket No. 1; Heckler &
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`Koch, Inc. v. German Sports Guns GmbH, et al, Cause No. 1:09-cv-00039. The crux of the 2009
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`litigation was HK USA’s claim that GSG, ATI, and Orion were engaged in the manufacture and
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`sale of a weapon—styled the “GSG-5”—that copied the design of the Heckler & Koch MP5. Id.
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`At the instigation of the parties’ respective executives, the parties engaged in settlement
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`negotiations, and on October 8, 2009 they signed a Settlement Agreement (“the Agreement”)
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`that stipulated to the dismissal of the infiingement suit. The Agreement’s preliminary recitals
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`stated that HK USA owned “a federal trademark registration in the mark ‘MP5’ (Reg. No.
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`2 GSG and ATI are both Defendants and Counterclaimants; for simplicity, we refer to them jointly throughout as
`“Defendants.”
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`3 Mr. lhloffs name is misspelled in some of the parties’ submissions and captions as “Nils Ilhoff."
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`3
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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 4 of 95 PageID #: 6947
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`1594109)” and that it claimed to own “in the United States a proprietary trade dress comprised of
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`the designs of certain elements of the MP5 firearms (the ‘MP5 trade dress’).” Docket No. 45-1 at
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`1. The Agreement also recited that GSG, ATI, and Orion neither admitted that they had infringed
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`HK USA’s rights nor conceded that HK USA even had any such rights:
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`WHEREAS, GSG, ATI, and Orion have filed in said Lawsuit Defendants ’ Answer
`and Counterclaim in which they seek a judgment declaring, inter alia, that their
`activities do not infringe, and have not infringed, any intellectual property rights
`of HK or otherwise violate any law, and that HK does not own the trademark,
`trade dress and other intellectual property rights it claims to own.
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`Id. (emphasis added); see also id. at 1] 9 (“Defendants make no admission of liability for the
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`claims made against them.”). As for the substance of the Agreement itself, the defendant parties
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`agreed to pay HK USA $300,000 in exchange for the dismissal of the suit. Id. at 1] 1. They also
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`agreed to halt manufacture of the allegedly infringing GSG-5 design, and to cease selling the
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`W
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`weapons once a “sell-off” date had passed. Id. at ‘ll 2. For its part, HK USA covenanted not to sue
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`GSG or any of its commercial partners in connection with a different weapon design, the “GSG-
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`522” firearm:
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`HK has reviewed the design of the GSG-522 attached hereto as Exhibit “A” (the
`“GSG-522 Firearm”) and covenants not to sue GSG or any of its customers,
`distributors, dealers or importers for its sale in the United States or anywhere in
`the world, provided GSG otherwise complies with this Agreement. This covenant
`extends to airsoft guns in the design of the GSG-522 firearm.
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`Id. atfl 5.
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`While the 2009 litigation was pending, ownership of the MP5 registered trademark-
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`together with any accompanying trade dress rights—changed hands between HK USA and HKG.
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`The process began on June 8, 2008, when HKG filed an application for an “intemational
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`registration under the Madrid Protocol” for the MP5 trademark within the United States,
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`triggering a PTO office action. Cooper Decl. 1| 7. On September 19 of the same year, the PTO
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`wrote back to HKG, infonning it that had provisionally refused the application for at least two
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`reasons: first, the MP5 trademark was registered in the name of HK USA rather than HKG;
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`second, an application by an unrelated company for an intent-to-use registration for the similar
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`mark “MPSAS” was already pending before the PTO, and would need to be resolved before
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`further action could be taken. See Docket No. 332-12 (Defs.’ Ex. L); Cooper Decl.1] 8. In order
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`to remove this first obstacle to HKG’s registration of the MP5 mark in the United States, HK
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`USA president G. Wayne Weber executed an assignment agreement (“the Assignment”)
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`transferring to HKG “all right, title and interest in and to the said [MP5] mark, together with the
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`good will of the business symbolized by the said mark and the respective registration.” Docket
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`No. 251-2 at 5. Weber signed the Assignment on March 19, 2009—some two months afier HK
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`USA had initiated the 2009 litigation, and more than six months before the parties to that
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`litigation settled it. But despite the pendency of the litigation, neither Weber nor any other
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`representative of HK USA informed GSG and ATI that the rights upon which the suit was
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`predicated had been transferred. Docket No. 332 at 20 (citing Defs.’ Ex. H).
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`Meanwhile, HKG continued in its efforts to secure U.S. trademark registration for the
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`MP5, and both of the Heckler & Koch entities continued to represent to the PTO in the interim
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`that HK USA owned the MP5 trademark, notwithstanding the Assignment. On March 23, 2009,
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`HKG, by counsel, wrote to the PTO that an assignment of the MP5 trademark registration from
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`HK USA to HKG was “being worked,” and therefore requested that its application for Madrid
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`Protocol registration be held in abeyance until the questions of ownership and the pending third-
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`party application could be resolved. Docket No. 332-13 at 5-7. Cooper Dec]. 1] 8. Nearly a year
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`later, complying with PTO deadlines for trademark registrants’ periodic filing of affidavits
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`verifying their continued use and intent to renew their marks, HK USA filed a “Section 8/9”
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`declaration with the PTO, holding itself out as the current owner of the MP5 mark. Docket No.
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`332-15.
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`In May 2010, the PTO informed HKG that the third party’s competing trademark
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`application had been abandoned, advising HKG that it was nonetheless still necessary for HKG’s
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`ownership of the MP5 mark to be established before the company’s application for U.S.
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`registration of the MP5 could be granted. Cooper Decl. 1] 10. HKG then recorded the Assignment
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`with the PTO on June 20, 2010; this marked Plaintiffs’ first public acknowledgment of the
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`transfer of rights.‘ Docket No. 251-2 at 2. The PTO responded by granting HKG’s registration
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`application on November 9, 2010. Cooper Decl.1| 10. HKG remains the holder of the registered
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`MP5 trademark. Am. Compl. 1| 12.
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`Procedural History
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`Plaintiffs contend that Defendants have failed to abide by the Settlement Agreement.
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`Specifically, they allege that Defendants have “repackaged” the GSG-5—a “knock-off’ weapon
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`designed to “replicate the look and feel of the famous MP5®”—and sold it under the label of the
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`GSG-522. Am. Compl. 1] 2. By manufacturing, importing, and selling this GSG-5 in GSG-522’s
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`clothes, Plaintiffs argue, Defendants have both violated their covenant not to sell the GSG-5 and
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`deceptively deviated from the GSG-522 design that they submitted for HK USA’s approval in
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`the Agreement. Id. Plaintiffs also allege that Defendants continued to manufacture and sell the
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`GSG-5 under its own label even after the 2010 “sell-off dates.” Id. at 1] 3, 27-32. According to
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`Plaintiffs, this conduct directly contravenes Paragraph 3 of the Settlement Agreement.
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`4 Plaintiffs contend that HKG did not “accept" the Assignment until June 15, 2010. Docket N0. 330 at 11, 1] 26
`(citing Cooper Decl {I 10). Plaintiffs’ account relies only on the declaration of HKG’s attomey Isolde Kurz-Cooper,
`and the parties vigorously dispute whether such a delayed acceptance occurred, whether “acceptance" is even
`necessary for an assignment of the type executed by HK USA, and whether such an acceptance has any relevance to
`the parties’ claims and counterclaims. We address some of these contentions below.
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`6
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`Bearing these grievances, Plaintiffs again brought suit against GSG and ATI. The original
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`version of this complaint, later removed from Indiana state court to this Court, was brought by
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`HK USA alone, and it contained only a claim for breach of contract. See Docket No. 1. Plaintiffs
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`subsequently sought leave to amend the complaint to add HKG as a plaintiff and to include
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`additional claims for tortious interference and fraud against both Defendants as well as claims of
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`state and federal trade dress infringement, trademark dilution, and unfair competition against
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`GSG alone. Magistrate Judge Baker granted leave to amend, Docket No. 44, and Plaintiffs filed
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`their amended complaint on May 22, 2012. Defendants’ subsequent motion to dismiss the
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`amended complaint [Docket No. 49] was granted in part and denied in part. We dismissed
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`Plaintiffs’ claims for tortious interference with a business relationship, fraud, and common-law
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`“unfair competition,” leaving intact their claims for breach of contract, trademark dilution,
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`statutory and common-law federal trademark infiingement, and state-law trademark
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`3
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`inffingement. Docket No. 214.
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`Defendants have also asserted a number of counterclaims alleging that Plaintiffs wronged
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`them in surreptitiously assigning the MP5 IP rights during the pendency of the 2009 litigation;
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`Defendants also bring counterclaims for breach of the Settlement Agreement and seek
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`declaratory judgments that Plaintiffs lack trade dress rights in the MP5 weapon design and that
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`Defendants are not liable for breach of the 2009 Agreement. The tort counterclaims implicate not
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`only HK USA, but also Weber, Ihloff and HKG. Weber signed the Assignment, and Defendants
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`allege that Counter Defendant Ihloff, as a high-ranking officer of HKG, also knew of it. Docket
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`No. 251 at 1] 27. Defendants initially alleged that an additional agreement between HK USA and
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`HKG arranged for the transfer of trade dress rights and related goodwill associated with the
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`MP5, but after discovery they have asserted that HK USA and HKG completed the assignment in
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`a single signed agreement. Id. at 1] 26; Docket No. 251 at 1| 32(f)(v). On September 20, 2012,
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`Ihloff executed a “Ratification and Consent” in which he, on behalf of HKG, announced that the
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`company “hereby ratifies, affirms, and agrees to be bound in all respects to the Settlement
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`Agreement” reached between HK USA and the Defendants. Docket No. 251 at 1] 34. According
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`to Defendants’ theory, Ihloff and HKG were aware of the false representations contained in the
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`Settlement Agreement at the time they ratified it. Docket No. 274 at 35-39.
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`The Court subsequently dismissed the actual fraud and constructive fraud claims against
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`Plaintiffs and the two Counter Defendants, and it dismissed the deception and tortious
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`interference claims against Ihloff. Docket No. 215. In its order, the Court primarily addressed
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`Defendants’ failure to establish proximate causation between their alleged damages and the
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`misrepresentations of HK USA and its officers. Id.
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`Defendants took two steps in response to the Court’s partial dismissal of their
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`counterclaims against HK USA, HKG, Weber, and Ihloff. First, on October 30, 2013, they filed a
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`motion for leave to file an amended answer and counterclaims. Docket No. 228. Second, they
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`filed a motion for reconsideration. Docket No. 235. On January 14, 2014, Magistrate Judge
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`Baker granted Defendants’ motion for leave to amend, and they accordingly filed