219 F. Supp. 3d 274
D. Mass.2016Background
- Sandy Beram (puzzle inventor) licensed 14 puzzle designs to Ceaco under a 1993 contract (Schedule 1 listed products and royalty rates); Puzzle Stix was added in 1999.
- Contract required Ceaco to pay royalties (product of selling price and royalty rate) and to provide quarterly sales/royalty reports; term survives for 100 years after Beram’s death unless earlier terminated.
- Beram alleged Ceaco stopped paying royalties (reducing/eliminating payments around 2000s), failed to provide required reports, and sold a product called “PuzzleStix” (2011–2015) attributed to another inventor without paying her royalties.
- Complaint brought 14 claims (copyright, trademark, breach of contract, fraud-based torts, Chapter 93A, accounting, etc.); many claims challenged as time-barred or inadequately pleaded.
- Court treated contract claims under New York law (choice-of-law clause) and tort claims under Massachusetts law (parties’ agreement).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations / fraudulent concealment tolling | Beram: Ceaco’s failure to provide quarterly reports fraudulently concealed breaches and tolls limitations. | Ceaco: No fraudulent concealment; reporting breach is contractual but not fiduciary concealment. | Court: No tolling — absence of fiduciary duty means mere failure to report does not constitute fraudulent concealment; but installment-royalty theory allows claims for breaches within limitations. |
| Copyright claim precondition | Beram: Ceaco had obligation under contract to secure copyright; claim should proceed. | Ceaco: Beram did not register the copyright; registration is precondition to suit. | Court: Dismissed copyright count — registration is mandatory precondition, contractual breach does not substitute. |
| Trademark abandonment and infringement | Beram: Ceaco used PuzzleStix and attributed product to others, causing infringement. | Ceaco: Any trademark rights were abandoned through nonuse; three-year nonuse is prima facie abandonment. | Court: Trademark claim dismissed without prejudice — complaint fails to plead current use or intent to resume. |
| Breach for unpaid royalties and “minimum annual royalty payments” | Beram: Ceaco owes unpaid royalties, including minimum annual royalty payments listed on Schedule 1. | Ceaco: Royalties are payable only on actual sales; Schedule 1 minima only trigger termination rights, not independent payment obligations. | Court: Survives only to extent of unpaid royalties on actual sales within the limitations period; minimum-annual-payment theory rejected. |
| Fraud and related torts (pleading) | Beram: Defendants misrepresented/failed to disclose sales and attribution (e.g., PuzzleStix). | Ceaco: Fraud allegations lack particularity and facts; sales were public. | Court: Fraud, fraudulent transfer, and related counts dismissed for failure to plead with Rule 9(b) particularity. |
| Individual liability (Glazer and Basque) | Beram: Piercing the corporate veil and/or other facts justify holding individuals liable. | Defendants: Glazer signed in corporate capacity; Basque not party — no basis for personal liability absent veil-piercing facts. | Court: Contract claims against Glazer and Basque dismissed (no veil-piercing facts); other non-contract claims against them not dismissed at this stage. |
Key Cases Cited
- In re Loestrin 24 Fe Antitrust Litig., 814 F.3d 538 (1st Cir.) (standard for accepting complaint allegations on motion to dismiss)
- Giragosian v. Ryan, 547 F.3d 59 (1st Cir.) (consideration of documents incorporated by reference on Rule 12(b)(6))
- Foley v. Wells Fargo Bank, N.A., 772 F.3d 63 (1st Cir.) (plausibility standard for Rule 12(b)(6))
- Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (Sup. Ct.) (registration as precondition to copyright suit)
- Airframe Sys., Inc. v. L-3 Commc’ns Corp., 658 F.3d 100 (1st Cir.) (registration/related copyright procedure issues)
- Gen. Healthcare Ltd. v. Qashat, 364 F.3d 332 (1st Cir.) (trademark abandonment and intent to resume use)
- McCarthy v. Azure, 22 F.3d 351 (1st Cir.) (signature in corporate capacity does not make signer a party)
- Peterson v. Highland Music, Inc., 140 F.3d 1313 (9th Cir.) (periodic royalties treated as installment obligations)