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KIM v. KIM

June 29, 2004.

EUI SEOB KIM, BY FOR THE CLEANERS CO., LTD., and CHANG HI KIM, Plaintiffs
v.
SU HEON KIM, and BY FOR THE CLEANERS, INC., Defendants.



The opinion of the court was delivered by: CYNTHIA RUFE, District Judge

MEMORANDUM OPINION AND ORDER

This action stems from the parties' efforts to develop, manufacture and distribute machines utilized in a "wet cleaning" process for "dry-clean only" clothing. Defendants move to dismiss this case under the anticipatory filing doctrine, and for lack of personal jurisdiction, improper venue and insufficient service of process. In the alternative, Defendants move to transfer this case to the United States District Court for the Northern District of Illinois. For the reasons below, the Court will deny the motion to dismiss and grant the motion to transfer.

I. BACKGROUND

  Plaintiffs Eui Seob Kim, Chang Hi Kim and By For the Cleaners Co., Ltd. ("BFTC-Korea") bring this action against Defendants Su Heon Kim and By For the Cleaners, Inc. ("BFTC-Illinois"). Eui Seob Kim is a Pennsylvania resident. Chang Hi Kim is a South Korea resident. BFTC-Korea is a South Korean corporation with its principal place of business in South Korea. Su Heon Kim is a resident of Illinois. BFTC-Illinois is an Illinois corporation with its principal place of business in Illinois. Jurisdiction is based on diversity of citizenship.*fn1 Because the Court is considering a motion to dismiss for lack of personal jurisdiction, the following factual recitation is drawn from Plaintiffs' allegations and the many disputed facts are construed in favor of Plaintiffs.*fn2

  PlaintiffEui Seob Kim and Defendant Su Heon Kim are both inventors of dry-cleaning machines and products. In the spring of 2002, they met at a trade show in Atlanta and discussed their respective inventions. After the trade show, Su Heon Kim called Eui Seob Kim in Philadelphia and invited him to attend a seminar in Chicago where Su Heon Kim planned to present his ideas for a wet cleaning process that avoids using environmentally-harmful chemicals to wash "dry clean only" clothing. As Eui Seob Kim had his own ideas for inventing wet cleaning machines, he accepted the invitation and attended the Chicago seminar in October 2002.

  After Eui Seob Kim returned to Philadelphia from Chicago, Su Heon Kim called him and suggested they pursue a joint venture to develop and manufacture wet cleaning washers and dryers. Su Heon Kim recruited Eui Seob Kim because of his scientific and technical expertise in dry cleaning machinery. They arranged a future meeting to discuss the joint venture.

  In November 2002, Su Heon Kim traveled to Philadelphia and met with Eui Seob Kim at a hotel near the airport. Plaintiff Chang Hi Kim also attended the meeting as a representative of Chang Shik Park, a Korean businessman who had helped Su Heon Kim develop earlier inventions. After a four-to-five hour meeting, the parties reached an oral agreement whereby Eui Seob Kim would develop the technical specifications for a wet cleaning machine and would own all patent rights. Thereafter, Chang Shik Park would form a South Korean company to manufacture the machines in South Korea, and eventually Su Heon Kim and his company, BFTC-Illinois, would establish a dealer network to market the machines. After the meeting, Su Heon Kim stayed overnight in Philadelphia and returned to Chicago the next day.

  Eui Seob Kim and Su Heon Kim continued to discuss invention of the machines via telephone, and they agreed to meet again in Philadelphia in December 2002. In the meantime, unbeknownst to Eui Seob Kim, Su Heon Kim filed his first provisional United States Patent application for a wet cleaning dryer on November 22, 2002. Eui Seob Kim now contends that this application and three of Su Heon Kim's related subsequent applications include Eui Seob Kim's design drawings and other work product but were submitted under Su Heon Kim's name only. Eui Seob Kim claims that Su Heon Kim's applications are contrary to the oral agreement that Eui Seob Kim would own all patent rights in the subject machines.

  On December 10, 2002, Chang Shik Park and Su Heon Kim met in Chicago and flew together to Philadelphia, where they met Eui Seob Kim at the airport. The three men then immediately drove to Leesburg, Virginia to observe wet cleaning processes in use at The Laundry Club, Inc. Eui Seob Kim claims that while visiting The Laundry Club, Inc., he developed a new idea for using ice water in the wet cleaning process, and he asked Su Heon Kim to test the "ice water idea." The group stayed overnight in Leesburg and drove back to the Philadelphia airport the next day. Su Heon Kim flew back to Chicago from Philadelphia.

  In furtherance of the business venture, Eui Seob Kim created drawings and gathered technical information in Philadelphia and sent them to Su Heon Kim in Chicago, who tested the "ice water idea" and reported favorable results to Eui Seob Kim. Soon thereafter, Eui Seob Kim visited Su Heon Kim in Chicago to see the results for himself. During this visit, Eui Seob Kim developed an idea for a dryer to be used in the wet cleaning process. Beginning in January 2003, Su Heon Kim paid Eui Seob Kim $6,000 a month for his services, eventually paying a total of $42,000 through July 2002. Su Heon Kim sent at least one of these payments to Eui Seob Kim in Philadelphia.

  Meanwhile, Chang Hi Kim and Chang Shik Park formed a company in South Korea, BFTC-Korea, to develop and manufacture the washer and dryer prototypes and eventually the finished machines. Su Heon Kim began forming a dealer network in the United States and laid plans to market the machines through BFTC-Illinois under his trademark, "FEORI." He collected fees from these dealers, and in January 2003, advanced approximately $90,000 to BFTC-Korea to hasten manufacture of the prototypes. In February 2003, Eui Seob Kim traveled to South Korea to oversee the manufacturing of his inventions.

  In April 2003, BFTC-Korea shipped the completed prototypes to Su Heon Kim in Illinois. After successfully testing the prototypes, Su Heon Kim and BFTC-Illinois agreed to purchase from BFTC-Korea approximately twenty additional wet cleaning washers and dryers for approximately $25,000 per washer-dryer set.

  On May 3, 2003, Su Heon Kim and BFTC-Illinois executed a contract designating Chang Hi Kim as the exclusive distributor for FEORI products in the northeastern United States (the "Exclusive Distributor Agreement"). As consideration for this right, Chang Hi Kim paid a $200,000 fee. Chang Hi Kim alleges that Su Heon Kim and BFTC-Illinois later breached the Exclusive Distributor Agreement by permitting other distributors to deal FEORI products in Chang Hi Kim's exclusive territory.

  In late August 2003, BFTC-Korea sought additional investment from an unnamed individual who had expressed interest in the machines. The investor requested written confirmation of BFTC-Korea's manufacturing rights and documentation of the patent rights for the machines. By this time, Eui Seob Kim had learned about Su Heon Kim's allegedly fraudulent patent applications. He and a BFTC-Korea representative (presumably Chang Hi Kim) explained to the investor that they were the real owners of the patent rights to the machines and that Su Heon Kim's patent applications were improper. Nonetheless, the investor insisted on written acknowledgment from Su Heon Kim confirming Eui Seob Kim and BFTC-Korea's rights.

  Accordingly, a BFTC-Korea representative (presumably Chang Hi Kim) and Su Heon Kim agreed in a telephone conversation to the terms of an agreement outlining the parties' respective rights and obligations ("Acknowledgment Agreement"). When reduced to writing, the October 9, 2003 Acknowledgment Agreement provided, in sum: (1) BFTC-Illinois will not transfer, acquire, buy or sell the patent rights for the wet cleaning machines; (2) BFTC-Korea owns exclusive manufacturing rights for the wet cleaning machines, and BFTC-Illinois will not deprive BFTC-Korea of those rights for any reason; (3) BFTC-Korea will create a new company, Company A, and until that company is established Chang Hi Kim will represent Company A; (4) beginning in January 2004, every month BFTC-Illinois will order "about 50 units" from Company A "by issuing irrevocable L/C [letter of credit]"; (5) BFTC-Illinois will not change the price or number of machines ordered without BFTC-Korea's permission; (6) if BFTC-Illinois fails to order 50 units every month, "Company A will conduct business independently in the U.S. market"; and (7) BFTC-Korea and BFTC-Illinois will comply with the Acknowledgment Agreement until expiration of the patent rights.*fn3 Despite having agreed to these terms orally, Su Heon Kim refused to sign a written copy of the Acknowledgment Agreement. As a consequence, negotiations with the investor proceeded no further.

  From August to October 2003, Su Heon Kim ordered via telephone a "substantial number" of the wet cleaning machines, and promised to make a partial payment to BFTC-Korea of approximately $700,000 by the end of October 2003.*fn4 BFTC-Korea manufactured the requested machines, but Su Heon Kim failed to pay any amount by the deadline. Because BFTC-Korea had expended substantial sums in filling the oral purchase orders, Su Heon Kim's failure to pay caused BFTC-Korea to suffer financial difficulty.

  To surmount its financial difficulties, BFTC-Korea applied for a loan from a South Korean bank. In support of its loan application, BFTC-Korea asked Su Heon Kim to provide documents acknowledging BFTC-Korea and Eui Seob Kim's rights regarding the machines. They also asked Su Heon Kim to provide written purchase orders documenting his previous oral purchase orders. On November 10, 2003, Su Heon Kim sent purchase orders for the machines totaling $2,150,000.*fn5 In addition, Su Heon Kim's attorney sent a letter to the South Korean bank alleging that Su Heon Kim and BFTC-Illinois are the sole owners of pending patent rights and manufacturing rights for the wet cleaning machines. Based on assertions in this letter, the bank refused to approve a loan to BFTC-Korea.

  On November 12, 2003, Chang Hi Kim sent a letter on behalf of BFTC-Korea to Su Heon Kim, BFTC-Illinois, and their network of dealers. The letter terminated the business relationship between BFTC-Korea and BFTC-Illinois due to a "breach of trust" on several fronts. First, the letter stated that Su Heon Kim had collected money from U.S. dealers but had failed to forward these monies to BFTC-Korea. Second, it accused Su Heon Kim of falsely "publicizing" that Eui Seob Kim was Su Heon Kim's employee, and that Eui Seob Kim was about to be fired. Third, the letter states that Eui Seob Kim is the only rightful owner of any patent rights in the machines, and therefore BFTC-Korea would from then on work with Eui Seob Kim and his company, Green Sense, to "manufacture and operate A/S for the machines."*fn6 Fourth, it contended that Su Heon Kim had done a poor job marketing the machines, resulting in poor sales, and that even when sales were good, he had failed to send money to BFTC-Korea. Finally, the letter stated that BFTC-Korea had filled $525,000 in purchase orders from dealers and would not be responsible for providing any additional machines or parts, but that it would "take charge of A/S for already delivered machines in good faith."*fn7

  Plaintiffs allege that after receiving this letter, Su Heon Kim and BFTC-Illinois began contacting other manufacturers about producing the wet cleaning machines invented by Eui Seob Kim, thereby misappropriating intellectual property and violating the parties' oral agreements. Defendants, on the other hand, contend that Plaintiffs continued to manufacture machines based on Su Heon Kim's designs, and that Plaintiffs marketed the ...


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