TAPP MFG, INC. v. SPEED UTV, LLC

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
TAPP MFG, INC., )
)
Plaintiff, )
)
v. ) 1:24-CV-944
)
SPEED UTV, LLC, )
)
Defendant. )
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
Before this court is Plaintiff Tapp MFG, Inc.’s Motion for
Preliminary Injunction, (Doc. 8). For the reasons stated herein,
Plaintiff’s motion will be granted.
I. FACTUAL BACKGROUND
This case arises from a failed business relationship
between Plaintiff Tapp MFG, Inc. (“Tapp”) and Defendant Speed
UTV, LLC (“Speed”). Tapp is a Canadian corporation that provides
“components to the automotive industry, including clutches and
accessories.” (Compl. (Doc. 1) ¶¶ 2–4.) Tapp was founded by
David Forsyth, who continues to serve as the company’s CEO. (Id.
¶ 46.) Speed is a Delaware LLC with headquarters in North
Carolina that manufactures and sells offroad, utility terrain
vehicles (“UTVs”). (Id. ¶¶ 5–6, 42; Def.’s Answer & Countercls.
(“Answer”) (Doc. 15) ¶¶ 5–6, 42.) Robby Gordon (“Gordon”) is the
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founder and CEO of Speed. (Compl. (Doc. 1) ¶ 48; Answer (Doc.
15) ¶ 48.)
In October 2020, representatives of Tapp and Speed met in
Anaheim, California to discuss the possible use of a Tapp-
designed clutch prototype in Speed’s UTVs. (Compl. (Doc. 1)
¶¶ 30-31; see Answer (Doc. 15) ¶¶ 30, 33.) Following the
meeting, the parties “discuss[ed] and negotiate[d] the contours
of a possible licensing agreement for [Tapp]’s clutch design.”
(Compl. (Doc. 1) ¶ 33; Answer (Doc. 15) ¶ 33.) On November 4,
2020, a representative of Tapp emailed Speed a bullet-pointed
list of terms. (Ex. 5 (Doc. 1-5) at 2; Compl. (Doc. 1) ¶ 34; see
Answer (Doc. 15) ¶ 33–34.)1 Prefatory language in the email
characterized the list as “serv[ing] as an interim and/or
supplemental agreement until we have the agreements drafted by
our lawyers in place.” (Ex. 5 (Doc. 1-5) at 2.) The list of
terms in Tapp’s email read as follows:
• If the secondary clutch meets or exceeds expectations,
Speed UTV will pay TAPP Mfg $60,000US with $30,000US
paid immediately by way of wire transfer with the
remaining $30,000 to be paid by adding it to the
purchase order for the first production.
• Upon receipt of the aforementioned $30,000US wire
transfer, Robby Gordon will take possession of the
secondary clutch prototype to have it scanned and
provide TAPP manufacturing with a copy of that scan.
1 All citations in this Memorandum Opinion and Order to
documents filed with this court refer to page numbers located at
the bottom right hand corned of the documents as they appear on
CM/ECF.
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• Speed will enter into a licensing agreement to pay
TAPP a royalty amount of 9.5% of production cost on
each of the primary and secondary clutches with a
minimum royalty of $15 per unit paid on each secondary
clutch and a minimum royalty of $30 paid per unit on
each primary clutch for the Arctic Cat Wildcat XX.
• Both primary and secondary clutches will remain the
intellectual property of Tapp Mfg and or its
subsidiary.
• Speed UTV agrees to indemnify Tapp Mfg against any
and all actions for damages caused by any clutches
manufactured by Speed UTV.
• Tapp Clutch will work with Mr. Steve Nichols to have
the agreement ready for signing by the end of today.
(Id.) Gordon responded on the same day, writing on behalf of
Speed: “We agree with the terms listed and look forward to
getting to Production[.] We also discussed a 5 year Agreement
with similar terms on renewal[.]” (Id.)2 This five-year duration
and renewal term was not among those terms listed in Tapp’s
email. (Id.) Tapp’s representative replied by thanking Mr.
Gordon and stating that Tapp “look[ed] forward to enjoying a
long and mutually beneficial relationship,” however, the reply
did not expressly address or acknowledge the five-year duration
and renewal term raised by Gordon. (Id. at 3.)
Following the November 4 email exchange, the parties’
business relationship progressed. Speed paid Tapp a “Secondary
2 Gordon’s response included his electronic signature. (See
Compl. (Doc. 1) ¶ 34; Doc. 1-6; Doc. 1–8.)
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Clutch Design Fee Deposit” of $30,000.3 (See Compl. (Doc. 1)
¶ 37; Ex. 30 (Doc. 1-30) at 2; Answer (Doc. 15) ¶ 37.) Tapp
delivered Speed the clutch prototype. (See Compl. (Doc. 1) at
¶ 37; Ex. 31 (Doc. 1-31).) Speed worked with Tapp to make the
clutch prototype compatible with Speed’s UTVs. (Compl. (Doc. 1)
¶ 41; Answer (Doc. 15) ¶ 41.)
At the same time, the parties continued to negotiate the
terms of an agreement. (See Compl. (Doc. 1) ¶ 38; Answer (Doc.
15) ¶ 38.) Tapp characterizes the parties as “negotiat[ing]
terms of a more robust ‘supplemental’ agreement that would
supersede” an agreement it believes was formed by the November 4
email exchange. (Compl. (Doc. 1) ¶ 38.) Speed describes the
parties as “exchang[ing] drafts of a formal license agreement”
that would incorporate the terms it believes the parties agreed
upon in the November 4 email exchange. (Answer (Doc. 15) ¶ 38.)
In any event, the parties agree that they exchanged drafts but
3 The invoice from Tapp to Speed for the “Secondary Clutch
Design Fee Deposit” of $30,000 is dated on October 22, 2020,
with a “due date” of October 22, 2020. (Ex. 30 (Doc. 1-30) at 2;
see Compl. (Doc. 1) ¶ 37.) In other words, the invoice appears
to have been issued, and the payment listed as due, before the
November 4 email exchange. (See Ex. 30 (Doc. 1-30) at 2; Ex. 5
(Doc. 1-5).) Further, because the parties are vague about when
in October 2020 their meeting in Anaheim occurred, (see Compl.
(Doc. 1) ¶ 30 (alleging the meeting occurred “[a]round October
2020); Answer (Doc. 15) ¶ 30 (admitting the meeting occurred “in
or about October 2020”)), it is unclear whether Tapp issued this
invoice before or after that meeting, (see Compl. (Doc. 1) ¶ 37;
Ex. 30 (Doc. 1-30) at 2.)
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failed to ever agree on an agreement. (See Compl. (Doc. 1)
¶¶ 38–40; Answer (Doc. 15) ¶¶ 38, 40; see also Ex. 33 (Doc. 1-
33).)
Speed began manufacturing and importing UTV vehicles in or
around September 2023. (Compl. (Doc. 1) ¶ 42; see Ex. 22 (Doc.
1-22) at 4.) Tapp alleges that Speed incorporated Tapp’s clutch
design into its UTVs, (Compl. (Doc. 1) ¶¶ 43–51), and that Speed
also manufactured, imported, and sold the clutches as “stand-
alone items,” intended to be used as spare or replacement parts,
(id. ¶ 43). As of November 2024, when Tapp filed its Complaint,
Speed offered for sale on its website at least nine variations
of its UTV. (Id. ¶ 42; Answer (Doc. 15) ¶ 42.) According to
Tapp, each of these variations used Tapp’s clutch design.
(Compl. (Doc. 1) ¶¶ 42–43).
Though Speed made periodic payments to Tapp, (id. ¶ 53; see
Answer (Doc. 15) ¶ 58), Tapp alleges that Speed failed to
perform according to the terms to which Tapp believe they had
agreed — that is, Speed failed to manufacture a minimum number
of clutches per year or pay Tapp a corresponding minimum
payment, (Compl. (Doc. 1) ¶¶ 52–53). According to Tapp, Speed
also struggled to deliver its UTVs to customers on time and
faced technical issues with its UTVs. (Id. ¶¶ 54, 71, 74.) These
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problems harmed not only Speed’s reputation, but Tapp’s, through
“guilt by association.” (Id. ¶¶ 69–71.)
Tapp alleges that it decided to “take action” in March 2024
because of its fear of sustaining reputational harm, as well as
Speed’s failure to perform as Tapp expected. (Id. ¶ 55.) On
March 6, 2024, Tapp sent Speed a letter demanding a full
accounting of all clutches manufactured by Speed and full
payment for the amount Tapp believed Speed owed it. (Id. ¶ 56;
Ex. 13 (Doc. 1–13); see Answer (Doc. 15) ¶ 56.)4 After receiving
this letter, Speed made payments to Tapp, (Compl. (Doc. 1) ¶ 58;
Answer (Doc. 15) ¶¶ 56, 58), though Tapp characterizes these
payments as “nominal,” (Compl. (Doc. 1) ¶¶ 58–59), and Speed
continued to manufacture and sell clutches, (Compl. (Doc. 1)
¶ 63; see Answer (Doc. 15) ¶ 43).
On October 1, 2024, Tapp was issued a patent for its clutch
design from an application filed on September 1, 2023. (Compl.
4 Tapp alleges that its March 6, 2024, letter gave Speed “30
days to cure its breach.” (Compl. (Doc. 1) ¶ 56.) It further
alleges that Speed failed to “take any steps towards curing its
breach” within thirty days — by April 6, 2024 — therefore, any
license Speed had to use Tapp’s clutch design terminated on that
date. (Id. ¶ 57.) However, Tapp’s letter of March 6, 2024,
contains no such explicit language; rather, the letter states,
“To avoid further escalation by TAPP, I would ask that you
respond to this letter by no later than Friday, March 22.” (Ex.
13 (Doc. 1-13) at 3.) The letter also references terms of the
draft agreement that the parties failed to agree to. (See id.
(“in accordance with Section 6 of the Agreement (‘Notice to
Parties’)”); Compl. (Doc. 1) ¶¶ 40, 56.)
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(Doc. 1) ¶¶ 17, 61; Answer (Doc. 15) ¶¶ 17, 61.) David Forsyth,
Tapp’s founder and CEO, is listed as the sole inventor. (Ex. 1
(Doc. 1-1) at 2.) Speed was aware of the application for the
‘695 Patent. (Compl. (Doc. 1) ¶ 62; Answer (Doc. 15) ¶ 62.) Tapp
alleges that Speed also knew of the issuance of the ‘695 Patent
at the time or shortly after it was issued, and that Speed is
aware its conduct — manufacturing and selling clutches using
Tapp’s design — is covered by the claims of the ‘695 Patent.
(Compl. (Doc. 1) ¶¶ 62–63.) Tapp avers that Speed has been
infringing, and continues to infringe, the ‘695 Patent since it
was issued on October 1, 2024, and that Tapp has not accepted
any payments from Speed after the issue date. (Id. ¶¶ 60, 67.)
II. PROCEDURAL HISTORY
Tapp filed its complaint on November 13, 2024. (Id. at 22–
29.) On December 18, 2024, Tapp filed a Motion for Preliminary
Injunction, (Pl.’s Mot. for Prelim. Inj. (Doc. 8)), seeking an
interim remedy for patent infringement. Tapp also filed a brief
in support of its motion, (Mem. of Law in Supp. of Mot. for
Prelim. Inj. (“Pl.’s Br.”) (Doc. 9)), on the same day. Speed
responded to Tapp’s motion, (Def.’s Mem. of Law in Opp’n to
Pl.’s Mot. for Prelim. Inj. (“Def.’s Resp.”) (Doc. 12)), on
January 29, 2025, and Tapp replied, (Reply to Defs.’ Opp’n to
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Pl.’s Mot. for Prelim. Inj. (“Pl.’s Reply”) (Doc. 13)), on
February 12, 2025.
A hearing on the motion for preliminary injunction was held
before this court on October 31, 2025. (Docket Entry 10/31/25.)
The parties were given the opportunity to submit supplemental
briefing following the hearing. (Id.) Both parties submitted
supplemental briefs on November 7, 2025. (Def.’s Supp. Br. (Doc.
27); Pl.’s Supp. Br. (Doc. 28).) The motion is now ripe for
ruling.
III. STANDARD OF REVIEW
Pursuant to 35 U.S.C. § 283, this court “may grant
injunctions in accordance with the principles of equity to
prevent the violation of any right secured by patent, on such
terms as the court deems reasonable.” 35 U.S.C. § 283. The
purpose of a preliminary injunction “is to protect the status
quo and to prevent irreparable harm during the pendency of a
lawsuit ultimately to preserve the court’s ability to render a
meaningful judgment on the merits.” In re Microsoft Corp.
Antitrust Litig., 333 F.3d 517, 525 (4th Cir. 2003). “In the
patent context, a preliminary injunction has a similarly
conservatory function.” MicroAire Surgical Instruments, LLC v.
Arthrex, Inc., 726 F. Supp. 2d 604, 615 (W.D. Va. 2010) (citing
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Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1344–45 (Fed. Cir.
2008)).
To obtain a preliminary injunction, a plaintiff must
establish four prongs: “[1] that he is likely to succeed on the
merits, [2] that he is likely to suffer irreparable harm in the
absence of preliminary relief, [3] that the balance of equities
tips in his favor, and [4] that an injunction is in the public
interest.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7,
20 (2008). “Courts considering whether to impose preliminary
injunctions must separately consider each Winter factor.” Di
Biase v. SPX Corp., 872 F.3d 224, 230 (4th Cir. 2017). A
preliminary injunction “is an extraordinary remedy intended to
protect the status quo and prevent irreparable harm during the
pendency of a lawsuit,” and the moving party bears the burden of
“clearly establish[ing] entitlement to the relief sought.” Id.
IV. ANALYSIS
A. Likelihood of Success on the Merits
Tapp’s motion for preliminary injunction is premised on its
allegations of ongoing infringement of the ‘695 patent by Speed.
(Pl.’s Mot. for Prelim. Inj. (Doc. 8); Pl.’s Br. (Doc. 9) at 4;
see also Compl. (Doc. 1) ¶¶ 81, 82–89.) In a patent infringement
case, “[t]o show likelihood of success on the merits a patentee
must show ‘(1) it will likely prove infringement and (2) its
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infringement claim will likely withstand challenges to the
validity and enforceability of the patents.’” Natera, Inc. v.
NeoGenomics Lab’ys, Inc., 106 F.4th 1369, 1375 (Fed. Cir. 2024);
United Therapeutics Corp. v. Liquidia Tech., Inc., 1:25-cv-368,
2025 WL 1549896, at *4 (M.D.N.C. May 30, 2025).
1. Likely to Prove Infringement
Tapp’s claim of patent infringement is captured by the
following allegations: Tapp granted Speed a license to use
Tapp’s clutch design in the email exchange of November 4, 2020,
(Compl. (Doc. 1) ¶ 34); Tapp terminated that license on April 6,
2024, (id. ¶ 57); the ‘695 patent was issued on October 1, 2024,
(id. ¶ 61); and Defendant has continued to use the clutch design
since then, (id. ¶ 67). Speed responds with two arguments on
this point. First, Speed disputes that its UTV clutch infringes
the ‘695 patent. (Def.’s Resp. (Doc. 12) at 12–14). Second,
Speed disputes Tapp’s termination of that license. (Id. at 11–
12.)
The thrust of Speed’s first argument is that Tapp cannot
show it is likely to prove infringement because the claim chart
that Tapp submitted to support its claim is deficient. (Id. at
12-14.) Tapp’s complaint alleges that “[Speed] has infringed and
continues to directly infringe upon one or more claims of the
‘695 Patent, either literally or under the Doctrine of
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Equivalents.” (Compl. (Doc. 1) ¶ 83.) According to Speed, the
claim chart supporting this claim, (Ex. 14 (Doc. 1-14)), “is
deficient and misleading and does not demonstrate that
Defendant’s accused products meet all the limitations of the
asserted patent claims.” (Def.’s Resp. (Doc. 12) at 13.)
However, Speed offers no specific reasons why it is “deficient”
and “misleading” beyond asserting that the chart includes images
of “[Speed]’s clutch, not [Tapp]’s clutches” to illustrate its
claims. (Id. at 14.) Moreover, Speed’s CEO Robby Gordon
expressly admits that Speed “incorporate[s] the Tapp clutch
design into its vehicles” and that “[a]ll of Speed UTV’s
vehicles utilize the Tapp Clutch design.” (Ex. A (Doc. 12-1) ¶¶
18–19; see also Compl. (Doc. 1) ¶¶ 44–51.) This court therefore
concludes that Tapp has sufficiently demonstrated for present
purposes that Defendant’s clutch infringes the ‘695 patent. See
Centrak, Inc. v. Sonitor Techs., Inc., 915 F.3d 1360, 1371 (Fed.
Cir. 2019) (“Infringement is a question of fact. Direct
infringement can be found when a defendant makes a product
containing each and every limitation set forth in a claim.”
(internal quotation marks and citations omitted)); Microsoft
Corp. v. GeoTag, Inc., 817 F.3d 1305, 1313 (Fed. Cir. 2016)
(“Under the doctrine of equivalents, infringement occurs where
there is equivalence between the elements of the accused product
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and the claimed elements of the patented invention.” (cleaned
up)).
In its second argument on this point, Speed agrees with
Tapp that “the parties entered into a licensing agreement,
whereby [Speed] obtained the right to use [Tapp’s] clutch
designs,” but it disputes Tapp’s termination of that license.
(Def.’s Resp. (Doc. 12) at 11–12.) Speed argues that Tapp could
not or did not terminate the license, and, therefore, Speed
retains the license to use Tapp’s patented clutch design. (Id.
at 12.) In other words, the parties disagree as to whether the
license included termination and notice terms and, if so,
whether Tapp complied with them.
Accordingly, this court must determine the nature and terms
of the license Tapp granted Speed, if one exists. “A patent
grants its owner the right to exclude others from making, using
or selling the patented invention. However, all or part of the
right to exclude may be waived by granting a license, which may
be express or implied.” Carborundum Co. v. Molten Metal Equip.
Innovations, Inc., 72 F.3d 872, 878 (Fed. Cir. 1995) (citation
omitted); see also Silicon Graphics, Inc. v. ATI Techs., Inc.,
607 F.3d 784, 793 (Fed. Cir. 2010) (“[L]icensed use of a product
does not constitute direct infringement and, therefore, does not
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support a finding of indirect infringement.” (internal quotation
marks omitted) (emphasis in original)).
North Carolina contract law controls the issues of
formation and construction of any license granted by Tapp to
Speed. See State Contracting & Eng’g Corp. v. Florida, 258 F.3d
1329, 1339 (Fed. Cir. 2001) (“Whether express or implied, a
license is a contract governed by ordinary principles of state
contract law.”) (internal quotation marks omitted) (quoting
McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917, 920 (Fed. Cir.
1995)).5 Under North Carolina law, the essential elements of a
valid contract are “offer, acceptance, consideration, and
mutuality of assent to the contract’s essential terms.” Se.
Caissons, LLC v. Choate Const. Co., 247 N.C. App. 104, 110, 784
S.E.2d 650, 654 (2016); see also Lannan v. Bd. of Governors of
Univ. of N.C., 387 N.C. 239, 250, 913 S.E.2d 163, 171 (2025).
“To serve as the foundation for a valid contract, the offer must
5 Neither party raises a choice of law issue, therefore,
this court applies the substantive law of North Carolina. Wiener
v. AXA Equitable Life Ins. Co., 58 F.4th 774, 782 (4th Cir.
2023) (“Where neither party argues that the forum state’s choice
of law rules require the court to apply the substantive law of
another state, the court should apply the forum state’s
substantive law.” (internal quotation marks and citation
omitted)). Further, this court applies North Carolina common law
because “granting a license under a patent or copyright” is one
of the “[m]any commercial transactions [that] are not governed
by Article 2 of the UCC.” Novamedix, Ltd. v. NDM Acquisition
Corp., 166 F.3d 1177, 1182 (Fed. Cir. 1999).
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be intended to create legal obligations if accepted.” Lannan,
387 N.C. at 250, 913 S.E.2d at 171. “Acceptance occurs only if
the parties ‘assent to the same thing in the same sense, . . .
and their minds must meet as to all the terms.’” Id. (citation
omitted). The agreement “must not be . . . intended merely to
open negotiations which will ultimately result in a
contract . . . .” Id. (quotation marks and citation omitted).
“Whether mutual assent is established and whether a contract was
intended between parties are questions for the trier of
fact.” Snyder v. Freeman, 300 N.C. 204, 217, 266 S.E.2d 593, 602
(1980).
Both Tapp and Speed contend that an express license existed
at some point during their business relationship. (See Pl.’s Br.
(Doc. 9) at 12; Def.’s Resp. (Doc. 12) at 11.) This court finds
otherwise. The facts now before this court on a preliminary
basis show that the parties engaged in discussions and
negotiations over the terms of a possible licensing agreement
but that they never managed to agree to the same terms.
Take the November 4 email exchange, (Ex. 5 (Doc. 1–5)),
which Tapp now contends constituted an express license, (Compl.
(Doc. 1) ¶ 35; Pl.’s Supp. Br. (Doc. 28) at 2). The exchange
begins with an email from Tapp’s representative to Gordon,
Speed’s CEO, providing a bullet-pointed list of terms, which the
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prefatory and concluding language of the email suggests is
intended as an offer. (See Ex. 5 (Doc. 1-5) at 2.) The email
begins by characterizing the list as “an interim and/or
supplemental agreement until we have the agreements drafted by
our lawyers in place,” and it closes out the list with the
request “[i]f you are comfortable with the aforementioned,
please let me know by responding to this email,” followed by the
anticipatory sign-off “[t]hank you in advance.” (Id.) However,
the immediate lead-in to the bullet-pointed list adds a dash of
ambiguity: “Based on our conversation today . . . we have agreed
to the following[.]” (Id.) This language suggests that the list
could be understood as a memorialization of terms hammered out
in a prior round of negotiation, rather than an offer of a
complete agreement seeking acceptance. (See id.)
Gordon’s response nine minutes later suggests he understood
the first email and the terms therein as an offer seeking his
acceptance. He responded — note the present tense verb — “We
agree with the terms listed[.]” (Id. (emphasis added).) However,
this apparent acceptance is modulated by the sentence that
immediately follows it: “We also discussed a 5 year Agreement
with similar terms on renewal[.]” (Id.) Thus, construing the
first email as an offer, Gordon’s response did not simply accept
that offer as-is; rather, the response added a term that does
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not appear in the bullet-pointed list. (See id.) Then, thirty-
six minutes later and in the final email of the exchange, Tapp’s
representative replied without addressing or even acknowledging
the additional term: “Thank you Robby. You have been a real
pleasure to work with and we look forward to enjoying a long and
mutually beneficial relationship.” (Id. at 3.) However, if the
first email is construed as a memorialization of prior
negotiations rather than an offer, Gordon’s response can be
understood as generally confirming the accuracy of the
memorialization but noting the omission of the additional terms.
(See id.)
According to this court’s reading, no contract — that is,
no express license — was formed by the November 4 email
exchange. At best, the first email from Tapp’s representative
constituted an offer that was subsequently rejected by Gordon’s
response, which purported to accept but added a new term. “If
the terms of the offer are changed or any new ones added by the
acceptance, there is no meeting of the minds and, consequently,
no contract. This counteroffer amounts to a rejection of the
original offer.” Normile v. Miller, 313 N.C. 98, 103, 326 S.E.2d
11, 15 (1985) (internal quotation marks and citation omitted).
In other words, Gordon’s response constituted a rejection and
counteroffer that Tapp was free to accept or reject. See id.;
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see also Ferguson v. Phillips, 268 N.C. 353, 355, 150 S.E.2d
518, 521 (1966) (“If the acceptance contains material conditions
not included in the offer, such purported acceptance constitutes
a counter proposal which the other party is not bound to
accept.” (internal quotation marks and citation omitted)). But
the reply email from Tapp’s representative did not accept
Gordon’s counteroffer; it was not an “unequivocal” manifestation
of Tapp’s intent to be bound by the terms of Gordon’s
counteroffer. See Standard Sand & Gravel Corp. v. McClay, 191
N.C. 313, 313, 131 S.E. 754, 755 (1926) (“[I]n order to
constitute a binding contract the offer and acceptance must be
in identical terms and unequivocal.” (emphasis added)); Exec.
Leasing Assocs. v. Rowland, 30 N.C. App. 590, 592, 227 S.E.2d
642, 644 (1976) (“An acceptance . . . manifests the offeree’s
intent to be bound by the terms of the offer.”). Then, even as
the parties’ collaboration progressed, they continued to
negotiate the terms of the license, exchanging drafts without
ever reaching agreement upon one. (See Compl. (Doc. 1) ¶¶ 38–40;
Ex. 33 (Doc. 1-33); Answer (Doc. 15) ¶¶ 38–40.)
This court is not convinced, however, that the first email
of the November 4 email exchange even constituted a definite,
present offer of a license. The email expressly anticipated a
future contract (or contracts) between the parties, with Tapp’s
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representative asserting that the parties should rely on the
listed terms only “until we have the agreements drafted by our
lawyers in place.” (See Ex. 5 (Doc. 1-5) at 2.) Moreover, the
relevant terms presented in that email suggest that the
anticipated future contract, rather than the present email
exchange, would create and govern the license. (See id.) Each of
those two terms read in relevant part: “Speed will enter into a
licensing agreement to pay TAPP a royalty amount . . . .” (Id.
(emphasis added).) The use of that future tense verb — “will
enter” — signifies the intent to enter into a license agreement
in the future, through the anticipated “agreements drafted by
our lawyers”, (id.), rather than at the present time, through
the immediate exchange of emails. See Parker v. Glosson, 182
N.C. App. 229, 232, 641 S.E.2d 735, 736 (2007) (“[W]hen
negotiating parties make clear that they do not intend to be
bound by a contract until a formal written agreement is
executed, no contract exists until that time.”)
In other words, what the parties see as a contract or
express license appears to this court to be only an agreement to
agree. In fact, it is less than that — it was an unconsummated
offer to agree, as the parties never managed to match an
acceptance to the offer. The reasoning of the North Carolina
Court of Appeals in Garland v. Orange County supports this
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conclusion. See 293 N.C. App. 232, 238–39, 900 S.E.2d 689, 694–
95. There, the court held a purported settlement agreement
unenforceable “because there was no settlement agreement.” Id.
at 238, 900 S.E.2d at 694. Applying “established rules relating
to contracts,” the court reviewed the course of negotiations
between the parties. Id. The court began with an email sent “‘to
memorialize the terms of the parties’ settlement reached at
today’s settlement conference’ and promising to draft a
settlement agreement to circulate ‘for review and signature[.]’”
Id. at 239, 900 S.E.2d at 694–95. The court held the email was
merely an agreement to agree “because the email contemplates a
future agreement for signature.” Id. at 239, 900 S.E.2d at 695.
Then, turning to the parties’ subsequent exchange of draft
settlement agreements, the court found no mutual assent or
meetings of the minds:
[D]efendant’s counsel sent plaintiff’s attorney a
proposed settlement agreement that required the parties’
signatures. [Then], plaintiff’s attorney sent an email
with changes to the proposed settlement agreement,
effectively rejecting defendant’s offer and proposing a
new agreement. [Next,] [d]efendant’s counsel
communicated that defendant required plaintiff to
execute the agreement it drafted by [a specified date],
and plaintiff did not accept the settlement offer by
that date; thus, the offer was withdrawn.
[Finally,] defendant’s attorney renewed their initial
offer . . . . [But] plaintiff’s counsel sent additional
changes to defendant’s proposed settlement agreement,
again rejecting defendant’s offer and proposing a new
agreement. Plaintiff’s counsel later sent an email . . .
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agreeing to defendant’s initial draft, but because
plaintiff had rejected defendant’s offer and
counteroffered with revision to the agreement, this
action did not constitute an acceptance.
Id. at 239–40, 900 S.E.2d at 695. Thus, the court determined
that neither the email nor the subsequent exchange of draft
agreements were sufficient to support the formation of a
contract. Id. at 240, 900 S.E.2d at 695.
The facts of the instant case — at least, as the court
preliminarily finds them for the purposes of the present motion
— bear a remarkable resemblance to those of Garland. Here,
Tapp’s email initiating the November 4 email exchange expressly
contemplates a “future agreement for signature” that will grant
and govern the license from Tapp to Speed. See id. at 239, 900
S.E.2d at 695; (Ex. 5 (Doc. 1-5) at 2). As such, the email is
“at best an agreement to agree.” See Garland, 293 N.C. App. at
239, 900 S.E.2d at 695. But even if it were a sufficiently
definite, present offer, Gordon’s response constituted a
rejection and counteroffer, to which, in turn, Tapp did not
agree. (See Ex. 5 (Doc. 1-5) at 2-3); see also Garland, 293 N.C.
App. at 239–40, 900 S.E.2d at 265. Thus, no express license
arose from the November 4 email exchange. Nor did the parties
subsequent exchange of draft license agreements result in a
binding express license. Like Garland, the parties “exchanged
several drafts” of the agreement, but each draft sent by one
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party to the other worked a modification of the proposed terms,
thereby rejecting the prior iteration of the proposed terms.
(See Compl. (Doc. 1) ¶¶ 38–40; Answer (Doc. 15) ¶¶ 38–40; Ex. 33
(Doc. 1-33)); Garland, 293 N.C. App. at 239–40, 900 S.E.2d at
265. In the end, Tapp and Speed failed to agree to any proposed
license agreement. (See Compl. (Doc. 1) ¶ 40; Answer (Doc. 15)
¶ 40.) Thus, no express license arose from their exchange of
drafts. See Garland, 293 N.C. App. at 239–40, 900 S.E.2d at 265.
The analysis does not end there, however. Although this
court finds that no express license was created by the parties,
it is still possible that they formed an implied license. Like
an express license, “[a]n implied license signifies a patentee’s
waiver of the statutory right to exclude others from making,
using, selling, offering to sell, or importing, the patented
invention.” Winbond Elecs. Corp. v. Int’l Trade Comm’n, 262 F.3d
1363, 1374 (Fed. Cir. 2001). “In most instances under contract
law, a patent or trademark owner intentionally creates an
express license. . . . In some circumstances, however, the
entire course of conduct between a patent or trademark owner and
an accused infringer may create an implied license.” McCoy, 67
F.3d at 920. In De Forest Radio Telephone & Telegraph Company v.
United States, the Supreme Court described the formation of an
implied license:
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Any language used by the owner of the patent or any
conduct on his part exhibited to another, from which
that other may properly infer that the owner consents to
his use of the patent in making or using it, or selling
it, upon which the other acts, constitutes a license,
and a defense to an action for a tort.
273 U.S. 236, 241 (1927); see also Wang Labs., Inc. v.
Mitsubishi Elecs. Am., Inc., 103 F.3d 1571, 1580 (Fed. Cir.
1997). Since De Forest, courts and scholars have sought to
categorize how implied licenses arise — “by acquiescence, by
conduct, by equitable estoppel (in pais), or by legal estoppel,”
for example — but “[t]hese labels describe not different kinds
of licenses, but rather different categories of conduct which
lead to the same conclusion: an implied license.” Wang Labs.,
103 F.3d at 1580.
The facts of De Forest prove useful here in discerning
whether the “entire course of conduct” between Tapp and Speed
created an implied license. At issue in De Forest was whether
the American Telephone & Telegraph Company (“AT&T”) granted the
United States an implied license to use “certain patented vacuum
tubes or audions used in radio communications.” De Forest, 273
U.S. at 237, 242. The United States, engaged in World War I at
the time, had informed AT&T that it planned to “have large
numbers of the audions made promptly for it by the General
Electric Company” (“GE”) for use in the war. Id. at 239. AT&T
responded that it would not “interfere with the immediate
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manufacture of the audions” but asserted that it was not waiving
any of its patent rights or claims by doing so. Id. AT&T then
“furnished information, drawings, and blueprints to [GE], and
permitted representatives and experts of the United States and
[GE] to witness and study the manufacture of said audions by
[AT&T.]” Id.
Examining these circumstances, the Supreme Court reasoned
that the combination of AT&T’s statement with its subsequent
acts to assist the United States to manufacture the audions,
“made such conduct clearly a consent to their manufacture and
use, and a license.” Id. at 241. In other words, the Court held
these “circumstances show clearly that what the company was
doing was not only fully consenting to the making and using by
the United States of the patent, but was aiding such making and
using, and in doing so was licensing it.” Id. at 242.
In the present case, neither party disputes that Tapp
granted Speed a license to use the clutch design covered by the
‘695 patent. Despite the absence of an express license, the
entire course of conduct between Tapp and Speed suggests the
existence of an implied license. Tapp communicated to Speed its
intent to license the clutch design and indicated that the scope
of such a license would encompass Speed’s use, manufacture, and
sale of clutches. (See Ex. 5 (Doc. 1-5); Ex. 7 (Doc. 1-7); Ex.
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33 (Doc. 1–33); see also Compl. (Doc. 1) ¶¶ 30–37.) In October
2020, Forsyth personally delivered Speed a Tapp prototype clutch
for installation in Speed’s prototype UTV — and went to
considerable effort to do so. (See Compl. (Doc. 1) at ¶¶ 30–32;
Ex. 7 (Doc. 1–7); Ex. 5 (Doc. 1-5); Answer (Doc. 15) ¶¶ 30, 33.)
Tapp then worked to modify the prototype clutch “to make it
compatible with the prototype of [Speed’s UTV].” (Compl. (Doc.
1) ¶ 41; Answer (Doc. 15) ¶ 41; see Exs. 24–28 (Docs. 1-24, 1-
25, 1-26, 1-27, 1-28).) Tapp also created a “robust set of
technical drawings” of the prototype clutch in anticipation of
having the prototype “machined by a third party and reproduced
on a large scale to accommodate [Speed’s] anticipated demand.”
(Compl. (Doc. 1) ¶ 32.) Tapp sold the modified prototype to
Speed in December 2020. (See id. ¶ 37; Exs. 30–31 (Docs. 1-30,
1-31); Ex. 5 (Doc. 1-5) at 2 (“Upon receipt of the
aforementioned $30,000US wire transfer, Robby Gordon will take
possession of the secondary clutch prototype . . . .”).)
Finally, despite the failure to agree to a “formal” licensing
agreement, Tapp was aware that, beginning in 2023, Speed began
manufacturing and selling to consumers the Tapp-designed clutch
as part of Speed’s UTVs or as a replacement part. (See Compl.
(Doc. 1) ¶¶ 42–56; see also Exs. 9, 12 (Docs. 1-9, 1-12).) In
fact, Tapp accepted “periodic payments” from Speed in 2024,
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(Compl. (Doc. 1) ¶ 53; see Ex. 12 (Doc. 1-12) at 1), and Forsyth
helped Speed troubleshoot technical issues in April of that
year, (see Compl. (Doc. 1) ¶ 54; Ex. 12 (Doc. 1-12) at 9; Ex. 18
(Doc. 1-18) at 2; Ex. 20 (Doc. 1-20)).
Thus, the “entire course of conduct” here resembles that in
De Forest. Not only did Tapp’s expressions and conduct
communicate to Speed that it would not immediately prevent
Speed’s use or manufacture of the Tapp-designed clutch, but Tapp
conduct showed it “was aiding such making and using, and in
doing so was licensing it.” See De Forest, 273 U.S. at 241–42;
see also Radar Indus. Inc. v. Cleveland Die & Mfg. Co., 424 F.
App’x 931, 933–34 (Fed. Cir. 2011). Consistent with the holding
of De Forest, this court finds here that Tapp granted Speed an
implied license to use the clutch design covered by the ‘695
patent.
In so finding, this court must next determine the scope of
the implied license between Tapp and Speed. See Carborundum, 72
F.3d at 878 (“Our inquiry does not end, however, once we
determine that a license should be implied. We must further look
to the circumstances of the sale to determine the scope of the
implied license.”). The scope and duration of an implied license
depends on the particular facts of the case. See id. (citing
Edison Elec. Light Co. v. Peninsular Light, Power & Heat Co.,
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101 F. 831, 836 (6th Cir. 1900) (“It is evident that the extent
of an implied license must depend on the peculiar facts of each
case.”)). The determination is “based on what the parties
reasonably intended as to the scope of the implied license based
on the circumstances.” Id.
For the present motion, most important is the extent to
which the implied license was freely terminable and whether it
has been terminated. With respect to terminability, this court
finds significant Tapp’s rejections of Speed’s requests for
durational and renewal terms during the parties’ negotiations
over an express license agreement. (See Compl. (Doc. 1) ¶¶ 38–
40; Ex. 5 (Doc. 1-5); Ex. 33 (Doc. 1–33).) While the parties
failed to form an express license, Tapp’s rejections suggest an
intent that any license between the parties be unencumbered by
durational or renewal terms, and Speed’s attempts to insert
those terms into the draft agreements suggest their
understanding that, without such terms, any license between the
parties was likely freely terminable. (See id.)
With respect to whether the license was in fact terminated,
Tapp argues that it terminated any license that existed as of
April 6, 2024, through its letter on March 6, 2024. (Compl.
(Doc. 1) ¶¶ 56–57; Pl.’s Supp. Br. (Doc. 28) at 6.) However, it
is not clear to this court that Tapp’s March 6 letter indicates
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a desire to terminate any license or relationship, especially
considering that Forsyth visited Speed in Arizona “on or around
March 28, 2024 to help diagnose and remedy the mechanical
issues” that Speed’s vehicles were allegedly facing. (Pl.’s Br.
(Doc. 9) at 16; see Ex. 13 (Doc. 1-13).) What is clear is that
any implied license ended on November 13, 2024, when Tapp filed
its complaint accusing Speed of infringing its patent. See KPR
U.S., LLC v. LifeSync Corp., No. 22-CV-60468-RAR, 2023 WL
5529176, at *11 (S.D. Fla. Aug. 27, 2023) (“Once the patentee
takes affirmative steps to protect its patent, the infringer
cannot reasonably believe that it has a license to use the
patent thereafter . . . .”); see also Chemagro Corp. v.
Universal Chem. Co., 244 F. Supp. 486, 490 (E.D. Tex. 1965) (“ A
patent license through acquiescence may be terminated by
subsequent conduct of the patent owner or a licensee thereof,
such as by the institution of an action for infringement of said
patent, since acquiescence in known infringements does not
authorize their continuance.”).
Accordingly, for the reasons discussed above, this court
finds that an implied license to practice the ‘695 patent arose
between Tapp and Speed, and Tapp had the power to and did in
fact terminate said license at least upon filing this lawsuit on
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November 13, 2024. Therefore, this court finds that Tapp will
likely prove infringement of the ‘695 patent by Speed.
2. Validity and Enforceability
In addition to showing that “it will likely prove
infringement,” Tapp must show “its infringement claim will
likely withstand challenges to validity and enforceability” of
the ‘695 patent in order to establish “likelihood of success on
the merits.” Natera, 106 F.4th at 1375. A patent is presumed
valid. Purdue Pharma L.P. v. Boehringer Ingelheim GMBH, 237 F.3d
1359, 1365 (Fed. Cir. 2001); KSR Int’l Co. v. Teleflex, Inc.,
550 U.S. 398, 412 (2007) (“By direction of 35 U.S.C. § 282, an
issued patent is presumed valid.”). The party challenging the
validity of a patent must come forward with evidence that raises
a substantial question of validity. Titan Tire Corp. v. Case New
Holland, Inc., 566 F.3d 1372, 1376 (Fed. Cir. 2009). If that
burden is satisfied, patentee then has the “burden of responding
with contrary evidence.” Id. at 1377. If the patentee does not
prove the validity question “lacks substantial merit,” courts
will deny the motion for a preliminary injunction. Amazon.com,
Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1350–51 (Fed.
Cir. 2001).
Here, Speed argues that “substantial questions exist as to
the validity of the ‘695 patent.” (Def.’s Resp. (Doc. 12) at
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10.) Speed offers two arguments as to why there is a substantial
question of invalidity. First, Speed contends that it “has
identified several prior art patents and other prior art
references that were not considered during the examination of
the ‘695 patent.”6 (Def.’s Resp. (Doc. 12) at 15.) Speed submits
evidence of the ‘544 Berto patent, (Ex. C (Doc. 12-3)), the ‘330
Galleher patent, (Ex. D (Doc. 12-4)), and the ‘994 Beyer patent,
(Ex. F (Doc. 12-5)), as well as a Youtube video “illustrat[ing]
an arrangement similar to” the ‘944 patent, (Ex. 6 (Doc. 12-6)
at 3).7 Speed contends that there are a number of similarities
between this prior art and Tapp’s ‘695 clutch and argues that
the prior art invalidates Claims 1, 2, 3, 4, 6, and 7 of Speed’s
‘695 patent.8 (See Def.’s Resp. (Doc. 12) at 15–16; see also Ex.
6 Tapp avers that the USPTO Examiner “considered fifty prior
art references” when examining Plaintiff’s ‘695 patent
application. (See Pl.’s Reply (Doc. 13) at 12 n.6 (citing Ex. 1
(Doc. 1-1) at 3).)
7 Speed’s CEO, Gordon, also asserts in his declaration that
“the Tapp clutch [is] a copy of a clutch known as the Polar
Vortex clutch produced by a company called Half Scale Dragsters,
Incorporated.” (Ex. A (Doc. 12-1) at 3, ¶ 5.) But this appears
to be a bare assertion for which Speed fails to adduce
supporting evidence.
8 Tapp argues that Speed’s failure to allege that prior art
invalidates Plaintiff’s Claims 5 and 8, means that at least
these two claims are “presumed valid” and that Defendant’s
challenge fails. (Pl.’s Reply (Doc. 13) at 13); see also Apple
Computer, Inc. v. Articulate Sys., Inc., 234 F.3d 14, 24 (Fed.
Cir. 2000) (“[E]ach claim of a patent is ‘presumed valid
independently of . . . the other claims’ and ‘dependent . . .
claims shall be presumed valid even though dependent upon an
invalid claim.’” (citation omitted)).
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C (Doc. 12-3) at 28–36; Ex. D (Doc. 12–4) at 17–25; Ex. E (Doc.
12-5) at 14–23; Ex. F (Doc. 12-6).) Tapp counters by identifying
various unique aspects of its ‘695 clutch missing from the prior
art that Speed cites. (See Ex. F (Doc. 13-6).)
Based on this evidence, it appears likely that Speed has
successfully shown that many of the elements of the ‘695 clutch
were “known in the prior art.” See ProBatter Sports, LLC v.
Sports Tutor, Inc., 680 F. App’x 972, 976 (Fed. Cir. 2017).
However, “[t]he law is clear that ‘a patent composed of several
elements is not proved obvious merely by demonstrating that each
of its elements was, independently, known in the prior art.’”
Id. (quoting KSR Int’l Co., 550 U.S. at 418). To show that the
‘695 patent is invalid for obviousness, Speed must articulate a
“reason why a skilled artisan would have made the combination”
that Tapp made when it designed the clutch claimed by its ‘695
patent. See Natera, Inc., 106 F.4th at 1376–77. Speed fails to
do so. Accordingly, this court finds Tapp “has shown it is more
likely than not to prevail over [the] invalidity challenge.” Id.
at 1376.
Second, Speed contends that Forsyth, Tapp’s founder and CEO
and inventor of the ‘695 patent, had been selling clutches for
years and “did not disclose any of his own prior art clutches
(or other clutches he might have been aware of at that time) to
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the USPTO for its consideration in connection with his
application.” (Def.’s Resp. (Doc. 12) at 16 (emphasis added).)
The only evidence Speed submits in support of this position is
the declaration of its own COO and co-founder, Todd Romano, who
states that he
believe[s] that many clutches that have been sold for
years, possibly as early as 2010, including clutches
sold by Plaintiff and its principal Mr. Forsyth, include
all the features that are set forth in Claims 1 and 3-
8, with only a few possible exceptions for features that
were contributed by Speed UTV, as described in Robby
Gordon’s Declaration.
(See Ex. G (Doc. 12-7) at 3.) Defendant offers no further
supporting documentation to substantiate the “belief” of its
COO. “The relevant inquiry” here, again, is “whether [Tapp] has
shown it is more likely than not to prevail over an invalidity
challenge.” See Natera, Inc., 106 F.4th at 1376–77. Accordingly,
this court finds that Speed’s assertion that Tapp’s own prior
art invalidates its ‘695 patent is insufficiently supported and
of no impact on the analysis of whether the ‘695 patent is valid
and enforceable.
B. Irreparable Harm
In addition to a likelihood of success on the merits, a
plaintiff seeking a preliminary injunction must also “make a
clear showing that it is likely to be irreparably harmed absent
preliminary relief.” Real Truth About Obama, Inc. v. FEC, 575
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F.3d 342, 347 (4th Cir. 2009), vacated on other grounds 559 U.S.
1089 (2010). “Mere injuries, however substantial, in terms of
money, time and energy necessarily expended in the absence of a
stay, are not enough. The possibility that adequate compensatory
or other corrective relief will be available at a later
date . . . weighs heavily against a claim of irreparable harm.”
Sampson v. Murray, 415 U.S. 61, 90 (1974) (internal quotation
marks omitted) (quoting Va. Petrol. Jobbers Ass’n v. Fed. Power
Comm’n, 259 F.2d 921, 925 (D.C. Cir. 1958)).
Here, Tapp contends that it will suffer irreparable harm
absent preliminary injunctive relief because it will lose market
share to Speed “in a two-player market.” (Pl.’s Br. (Doc. 9) at
21–23.)9 Specifically, Tapp contends that Tapp and Speed “are the
only two entities that manufacture clutches that practice the
’695 Patent, including those that would be used as replacement,
spare or as warranty parts in [Speed]’s Vehicles.” (Id. at 21.)
“[T]he existence of a two-player market may well serve as a
substantial ground for granting an injunction — e.g., because it
creates an inference that an infringing sale amounts to a lost
9 Plaintiff also argues that it will be irreparably harmed
due to loss of reputation and goodwill, as well as lost business
opportunities. (Pl.’s Br. (Doc. 9) at 23–28.) This court does
not find these arguments persuasive because Plaintiff has not
made a sufficient showing that the allegedly infringing actions
of Defendant are linked to either of these harms.
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sale for the patentee.” Robert Bosch LLC v. Pylon Mfg. Corp.,
659 F.3d 1142, 1151 (Fed. Cir. 2011) (emphasis omitted). In
Robert Bosch LLC,
the district court committed a clear error in judgment
when it concluded that Bosch failed to demonstrate
irreparable harm. The record [t]here contain[ed]
undisputed evidence of direct competition in each of the
market segments identified by the parties. Bosch also
introduced unrebutted evidence of loss of market share
and access to potential customers, as well as Pylon’s
inability to satisfy a judgment.
Id. at 1152. “While the party seeking an injunction bears the
burden of showing lost market share . . . Bosch made a prima
facie showing of lost market share, and Pylon proffered no
evidence to rebut that showing.” Id. at 1154.
Speed argues that Tapp is not losing any market-share
because Speed “does not sell the clutches it manufactures apart
from use in its own vehicles,” and Tapp does not manufacture or
sell UTV vehicles. (Def.’s Resp. (Doc. 12) at 17–18.)10 However,
Tapp adduces two invoices that appear to show that Speed sells
clutches as individual replacement units, separate and apart
10 Tapp responds that “every sale by [Speed] — including
those admittedly installed on its own Vehicles — is a lost sale
by TAPP.” (Pl.’s Reply (Doc. 13) at 11.) This argument is not
persuasive. Plaintiff does not sell UTV vehicles, so any UTV
sold by Defendant (even if that UTV incorporates Plaintiff’s
clutch design) does not cause Plaintiff to lose shares in a
market in which it competes. If Plaintiff succeeds on the merits
of its patent infringement claim, it can collect damages from
Defendant for Defendant’s use of the clutch design in the UTV
vehicles that it sells. That alleged harm is not irreparable.
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from its UTV vehicles. (See Exs. G–H (Docs. 13-7, 13-8).)
Although Tapp’s evidence of Speed’s individual sales of clutches
is thin, this court finds that it is just enough for a prima
facie showing that Tapp and Speed compete in a two-player market
to sell the clutches as replacement parts and, therefore, every
infringing sale made by Speed of a replacement clutch is a lost
sale for Tapp. See Robert Bosch LLC, 659 F.3d at 1151. Moreover,
the only evidence that Speed cites to rebut Tapp’s argument is
Gordon’s declaration that “Tapp produces clutches in low volumes
from a machine shop, not a mass production facility.” (See
Def.’s Resp. (Doc. 12) at 18 (citing Ex. A (Doc. 12-1) ¶ 20h).)
Tapp requests that this court preliminarily enjoin Speed
from continuing to sell the allegedly infringing clutches, each
of which likely results in a lost sale for Tapp. Accordingly,
this court finds Tapp has established a likelihood of
irreparable harm absent injunctive relief.
C. Balance of Equities
The third prong of the preliminary injunction standard
requires that this court determine whether “the balance of
equities tips in [Tapp’s] favor.” Winter, 555 U.S. at 20. This
requires assessment of the harm Speed will suffer if Tapp’s
motion is granted. See Int’l Lab. Mgmt. Corp. v. Perez, No.
1:14CV231, 2014 WL 1668131, at *14 (M.D.N.C. Apr. 25, 2014).
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Tapp argues that Speed is a willful infringer and “[i]t is
axiomatic that an infringer . . . cannot complain about the loss
of ability to offer its infringing product.” (Pl.’s Br. (Doc. 9)
at 28); see LEGO A/S v. ZURU Inc., 799 F. App’x 823, 832 (Fed.
Cir. 2020). Speed responds that the balance of equities should
tip in its favor because, although Speed has begun to find a
replacement clutch, an injunction “would still be detrimental,
putting at risk [Speed]’s supply chain, including at least
existing orders for vehicles with the current clutch design and
[Speed]’s ability to service and replace clutches in its
vehicles that have already been sold and delivered.” (Def.’s
Supp. Br. (Doc. 27) at 11).
This court finds that the balance of equities weighs in
favor of granting Tapp’s motion for preliminary injunction. In
the absence of an injunction, Tapp is unable to enforce the
legal rights it possesses under the patent, and it would “face
substantial hardship in being forced ‘to compete against its own
patented invention.’” See Metalcraft of Mayville, Inc. v. The
Toro Co., 848 F.3d 1358, 1369 (Fed. Cir. 2017); see also Robert
Bosch, 659 F.3d at 1156. While Speed may suffer some costs from
unsold inventory of Tapp-designed clutches, the record reflects
that Speed has already begun using an alternative clutch in its
products. (See Ex. 3 (Doc. 28-3).) Speed’s website reflects that
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this new clutch is available for vehicles currently in
production and that it can be installed in older models. (See
id.) This court also notes that any potential inequitable harm
to Speed will be “secured by the issuance of [a] bond if the
ultimate ruling is non-infringement or patent
invalidity.” See Glaxo Grp. Ltd. v. Apotex, Inc., 64 F. App’x
751, 756 (Fed. Cir. 2003). For these reasons, this court
concludes that the balance of equities weighs in Tapp’s favor.
D. Public Interest
The final prong Tapp must establish is that “an injunction
is in the public interest.” Winter, 555 U.S. at 20. “[T]he
public is best served by enforcing patents that are likely valid
and infringed.” Abbott Labs. v. Andrx Pharms., Inc., 452 F.3d
1331, 1348 (Fed. Cir. 2006). However, rather than the undoubted
public interest in protecting legal rights secured by valid
patents, the crux of a trial court’s public interest analysis
should be whether there exists some critical public interest
that would be injured by the grant of preliminary relief. See
Hybritech Inc. v. Abbott Labs., 849 F.2d 1446, 1458 (Fed. Cir.
1988). That is, the public’s interest in enforcing patent rights
must be weighed alongside other aspects of the public interest.
ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d
1312, 1341 (Fed. Cir. 2012).
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Here, Tapp argues (1) that “[t]he public has a significant
interest in protecting patents from infringement” and (2) that
“public interest will be served . . . [because Speed]’s Vehicles
pose an on-going threat to public safety.” (Pl.’s Br. (Doc. 9)
at 29–30.) In response, Speed simply repeats its overarching
theory of the case: Tapp deceptively induced Speed to partner
and then pulled the rug out from under Speed by terminating the
license agreement “in order to pave the way for a better
business opportunity.” (Def.’s Resp. (Doc. 12) at 21–22.) Speed
avers “[t]his is not what the patent system was created to
foster.” (Id. at 22.)
This court finds the public interest lies with Tapp.
Because it is unclear to this court that there was an express
license agreement, Speed’s argument that Tapp is trying to avoid
its obligations under such an agreement is unpersuasive. A
preliminary injunction in this case would assure that Tapp can
enforce their presumptively valid patent.
E. Bond Requirement
Tapp argues that a “minimal bond” is appropriate here
because it has “submitted evidence demonstrating Defendant’s
blatant infringement.” (Pl.’s Br. (Doc. 9) at 31.) Speed makes
no argument regarding the appropriate bond amount in this case.
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The Federal Rules of Civil Procedure provide that no
preliminary injunction can be issued unless the party awarded
injunctive relief is required to post a bond in a sum that “the
court considers proper.” Fed. R. Civ. P. 65(c). The purpose of
such a bond is to secure “costs and damages sustained” by the
enjoined party if a later court deems that party “wrongfully
enjoined or restrained.” Id. The bond requirement “is mandatory
and unambiguous.” Hoechst Diafoil Co. v. Nan Ya Plastics Corp.,
174 F.3d 411, 421 (4th Cir. 1999). Thus, a district court
commits legal error if it fails to require a bond upon issuing
preliminary injunctive relief. Id. However, the precise amount
of a bond is within the trial court’s discretion. Id. “Where the
district court determines that the risk of harm [to the enjoined
party] is remote, or that the circumstances otherwise warrant
it, the court may fix the amount of the bond accordingly. In
some circumstances, a nominal bond may suffice.” Id. at 421 n.3.
The bond can be waived entirely when the defendant would not
suffer any harm from the injunction. See Citizens for a
Responsible Curriculum v. Montgomery Cnty. Pub. Schs., No.
Civ.A. AW-05-1194, 2005 WL 1075634, at *12 (D. Md. May 5, 2005).
Here, because Speed has not cited any specific evidence
that would allow this court to quantify the potential harm to
it, nor has it provided any estimate of monetary damage it will
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suffer because of a preliminary injunction, this court finds
that a nominal bond is appropriate. See Neo Gen Screening, Inc.
v. TeleChem Intern., Inc., 69 F. App’x 550, 556–57 (3d Cir.
2003) (requiring a nominal bond of $10,000 where a defendant had
not demonstrated harm from an injunction); Am. Fed’n of Gov’t
Emps., AFL-CIO v. Trump, 792 F. Supp. 3d 985, 1006 (N.D. Cal.
2025) (“The Court concludes that a nominal bond is warranted in
the amount of $10,000 . . . .”). Accordingly, this court will
require Tapp to post a $10,000 bond. However, either party may
move to adjust the bond amount while the preliminary injunction
remains in effect should either party conclude that a different
amount would be appropriate. Lab’y Corp. of Am. Holdings v.
Kearns, 84 F. Supp. 3d 447, 466 (M.D.N.C. 2015).
V. CONCLUSION
For the foregoing reasons,
IT IS THEREFORE ORDERED that Plaintiff Tapp Mfg., Inc.’s
Motion for Preliminary Injunction, (Doc. 8), is GRANTED.
IT IS FURTHER ORDERED that a preliminary injunction issued
in this matter, and Defendant Speed UTV, LLC is hereby ENJOINED
AND PROHIBITED from continuing to make, use, import, sell, or
offer primary clutches that allegedly infringe Plaintiff Tapp
Mfg., Inc.’s U.S. Patent No. 12,104,695.
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IT IS FURTHER ORDERED that this preliminary injunction shall
remain in effect pending further order of this court.
This order shall become effective at the date and time of
filing with the Clerk and upon Plaintiff’s posting of a bond in
the amount of Ten Thousand Dollars and 00/100 cents ($10,000)
with the Clerk.
This the 27th day of January, 2026.
__________________________________
United States District Judge
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