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La-Z-Boy failed to pay royalties for electronic footrest technology: plaintiff

Amount:

$5,782,032

Type:

Verdict-Plaintiff

State:

Florida

Venue:

Federal

Court:

U.S. District Court, Southern District, West Palm Beach

Case Type:

Intellectual Property – Infringement, Trade Secrets, Misappropriation of Trade Secrets

Case Name:

Megdal Associates, LLC v. La-Z-Boy, Inc.,
No. 9:14-cv-81476-WJZ

Date:

March 15, 2016

Parties

Plaintiff(s):

Megdal Associates, LLC

Plaintiff Attorney(s):

Scott G. Hawkins;
Jones Foster Johnston & Stubbs;
West Palm Beach,
FL,
for
Megdal Associates, LLC ■ Ronald J. Schutz;
Robins Kaplan, LLP;
Minneapolis,
MN,
for
Megdal Associates, LLC ■ Patrick M. Arenz;
Robins Kalan, LLP;
Minneapolis,
MN,
for
Megdal Associates, LLC ■ Ari B. Lukoff;
Robins Kaplan, LLP;
Minneapolis,
MN,
for
Megdal Associates, LLC ■ Emily E. Niles;
Robins Kaplan, LLP;
Minneapolis,
MN,
for
Megdal Associates, LLC ■ Shira T. Shapiro;
Robins Kaplan, LLP;
Minneapolis,
MN,
for
Megdal Associates, LLC ■ Michael Anthony Kolcun Jr.;
Robins Kaplan, LLP;
New York,
NY,
for
Megdal Associates, LLC ■ James Copley Gavigan Jr.;
Jones Foster Johnston & Stubbs;
West Palm Beach,
FL,
for
Megdal Associates, LLC

Defendant(s):

La-Z-Boy, Inc.

Defense Attorney(s):

Joshua R. Brown;
Greenberg Traurig LLP;
Orlando,
FL,
for
La-Z-Boy, Inc. ■ Kurt A. Kappes;
Greenberg Traurig LLP;
Sacramento,
CA,
for
La-Z-Boy, Inc. ■ Adam Benjamin Landa;
Greenberg Traurig LLP;
Orlando,
FL,
for
La-Z-Boy, Inc. ■ Glenn E. Goldstein;
Greenberg Traurig LLP;
Ft. Laurderale,
FL,
for
La-Z-Boy, Inc. ■ John Luger McManus;
Greenberg Traurig LLP;
Ft. Lauderdale,
FL,
for
La-Z-Boy, Inc.

Facts:

In 2002, plaintiff Megdal Associates, LLC entered into an agreement with La-Z-Boy, Inc. wherein Megdal agreed to license its power footrests patented technology to reclining furniture manufacturer La-Z-Boy. After several years during which the parties abided by this agreement, a dispute arose from the alleged failure on the part of La-Z-Boy to pay royalties for chairs it sold that use electronic mechanisms to power the reclining footrests of those chairs. In March 2013 Megdal discovered that La-Z-Boy was using electronic mechanisms to power footrests built into its chairs that were remarkably similar to Megdal’s patented technology. When Megdal protested, La-Z-Boy insisted that the electronic mechanisms it was presently using to power its footrests were improvements on Megdal’s patented technology and not protected by the patent and not the subject of the 2002 licensing agreement. On Nov. 25, 2014, Megdal sued La-Z-Boy for breach of contract and declaratory judgment of Megdal’s ownership of the "improvements" made to its patented technology by La-Z-Boy under the 2002 agreement. Megdal also alleged patent infringement and misappropriation of trade secrets under applicable Florida statutes. Prior to the mid-1990s La-Z-Boy seating products historically had footrests that moved in response to manual exertion by the seat’s occupant. For many years, the footrest on La-Z-Boy products were extended and retracted by the occupant manually rotating the wooden handle on the side of the furniture. Similarly, for many years, the backrest on La-Z-Boy products were moved by the occupant exerting pressure on his or her back, while holding and pushing the armrests for leverage. During the 1990s the initial principal of Megdal Associates, LLC, Paul Megdal, developed an electronic technology that facilitated moving chairs of the sort manufactured by La-Z-Boy to achieve the moving functionalities by pressing buttons instead of using manual exertion. When an occupant of power motion furniture presses these buttons, the electrically-powered drive system causes movement of parts of the furniture such as the footrest and backrest. Megdal and his wife Florence had retired to Florida after working all their lives in their family furniture business. When Florence became ill, it became more difficult for her to utilize a La-Z-Boy chair the couple owned. This inspired Paul to modify the chair to provide motor driven components responding to electronic controls. In 1995 Paul Megdal approached La-Z-Boy to discuss incorporating his electronic and motor driven technology into the La-Z-Boy product line. Negotiations ensued that involved the parties entering into certain confidentiality agreements. The negotiations resulted in the 2002 licensing agreement whereby La-Z-Boy agreed to pay Megdal future royalties for all movable chairs sold by La-Z-Boy that incorporate the licensed technology. After entering into the licensing agreements, La-Z-Boy failed to account to the Megdals in the manner and frequency called for by their agreement. By the Megdals’ calculations the royalties due them began falling off. This led to the litigation initiated by the Megdals that they pretty much regarded as a book account collection case that required a thorough audit by way of discovery. Defense counsel for La-Z-Boy defended the claims brought by Megdal Associates by claiming that a great deal of the technology incorporated into many of the La-Z-Boy line of products came from sources other than Megdal. Much of the technology provided by Megdal had been improved upon and a great deal of the litigation focused on the specific terms of the licensing agreements that stated in fairly unambiguous language that all improvements to the licensed technology would become a part of the products so licensed and royalties would be paid accordingly.

Injury:

The royalties allegedly due pursuant to written licensing agreements were in controversy. Ultimately, the controversy focused on five differentiated electronic mechanism incorporated into the La-Z-Boy product line. The jury was asked to determine which of the five disputed mechanisms were the subject to the licensing agreements. After that determination was made, the calculation of damages was pretty much an accounting exercise.

Result:

The jury found that three of the five disputed mechanisms were subject to the licensing agreements and for which royalties were wrongfully withheld. The jury awarded Megdal Associates $5,782,032.

Trial Information:

Judge:

William J. Zloch

Trial Length:

8
 days

Trial Deliberations:

4.5
 hours

Jury Vote:

8-0

Editor’s Comment:

This report is based on information that was provided by plaintiff’s and defense counsel.