Full opinion text
DECISION AND ORDER WARREN, Senior District Judge. I. FINDINGS OF FACT A. ACTORS 1. Paliafito America, Inc. (“Paliafito”) is an Illinois corporation with its principal place of business at 1420 Kensington Road, Suite 207, Oak Brook, Illinois. (1 Tr. 157 — 58:22— 25, 1-4 (Paliafito).) Paliafito was previously known as Wisconsin Area Athletic Clinics (“WAAC”). WAAC is incorporated in Wisconsin. (1 Tr. 147:23 — 148:2; 2 Tr. 363:5-11 (Paliafito).) 2. Paliafito had the same rights under the Agreement as WAAC did since the Agreement was assigned by WAAC to Paliafito, as permitted under Section 16 of the Agreement (“[Mantae] acknowledges that WAAC contemplates assignment of its rights herein to Paliafito America, Inc. ... and agrees that this Agreement may be assigned to such an entity....”). (1 Tr. 147-48:23-25, 1-6 (Paliafito); DX 11A § 16.) 3. Third party defendants Miryoung (“Joy”) Lee and Jong Sik (“Jerrold” or “Jerry”) Lee (collectively, “the Lees”) are husband and wife (Third Party Defendants’ Answer to First Amended Counterclaim and Third Party Complaint and Jury Demand (“Mantae’s Ans.” or “Mantae’s Ctcl.”) ¶¶ 6, 7) and are Korean nationals residing in the United States. (Mantae’s Ans. ¶¶ 6, 7.) Joy Lee, who has been living in the United States fourteen years, is a resident alien with permanent resident status. (2 Tr.2d 205:24-25; 206:1-11; 207:22 — 208:10, 10 Tr.2d 1031:6-8 (Lee).) Jerrold Lee spends ninety to ninety-five percent of his time in Korea. (3 Tr.2d 261:5-7 (Lee).) 4. Joy Lee is also known as Miryoung Song, Miryoung Song Deering, Miryoung Deering, Miryoung Melody Lee, and Miryoung Joy Lee. (10 Tr.2d 1032:3-20 (Joy Lee).) The name on her passport is Mi Ryoung Deering Song. (2 Tr.2d 205:5-8 (Joy Lee); DX 713.) Joy Lee was born Miryoung Song and married into the name Deering, becoming Miryoung Song Deering. Sometimes she used her maiden name as her middle name. Joy Lee divorced, eventually married Jerrold Lee and adopted the name Lee. Though given the name Melody by her English teacher when she came to the U.S. because Miryoung is hard to remember, she did not like the name Melody and changed it to Joy. Joy Lee testified that many Koreans adopt American names as “nicknames.” She further testified that she has not used any of the above names in order to deceive Paliafito. (10 Tr.2d 1031:24 — 1033:14 (Joy Lee).) 5. Joy Lee currently owns 100% of third party defendant Many Amazing Ideas, Inc. (“MAI”). (2 Tr.2d 219:2-6 (Joy Lee).) MAI was formerly known as Mantae America, Inc. (DX 59.) Mantae’s predecessor company was Best International, which was also owned by the Lees. (4 Tr.2d 287:5-11 (Joy Lee); DX 24 ¶ 6.) 6. Joy Lee also controls Grip Toys, Inc., as president of the corporation. (DX 262; DX 263.) 7. Joy Lee and Jerrold Lee work together in the production and marketing of GRIP BALL: Jerrold Lee is in charge of manufacturing, and Joy Lee is in charge of sales worldwide. (3 Tr.2d 259, 260-61:6-13, 18-25, 1 (Joy Lee).) 8. Third party defendant MAI is a New York corporation with its principal place of business in California. (Mantae’s Ctcl. ¶ 1; DX 12; DX 9.) 9. MAI also has an office at 990 Avenue of the Americas, Suite 18-S, New York, NY. (DX 5.) 10. MAI is the assignee of all of the right, title and interest in and to a “pitch and catch” game marketed in association with the mark “GRIP BALL” (the “GRIP BALL Game” or the “Game”). (DX 105.) 11. Third party defendant Mantae Company, Limited (“MCL”) is an alien corporation organized under the laws of the Republic of Korea with its principal place of business in or near Seoul, Korea. (DX 11 A, at 1, ¶ 1; DX 248; DX 248T; DX 249; DX 249T.) 12. MCL manufactures GRIP BALL. (1 Tr. 168:7-9, 19-23 (Paliafito); 10 Tr.2d 1034:7-18 (Joy Lee); DX 11A, at 1, ¶3.) 13. Joy Lee owns fifty percent of MCL. (Mantae’s Ans. ¶ 8.) Jae Due Kim, a Korean national, owns the other half. (2 Tr.2d 219:7-12 (Joy Lee); 10 Tr.2d 1034:13-18 (Joy Lee).) 14. Puff Pac Production, Limited (“Puff Pac”) is an alien corporation organized under the laws of the Republic of Korea with its principal place of business in Korea. (DX 267; DX 268.) 15. Puff Pac also manufactures the Game. (DX 241 ¶ 7; 10 Tr.2d 1039:2-4 (Joy Lee).) 16. Jerrold Lee and his family own Puff Pac. (10 Tr.2d 1034:2-3 (Joy Lee).) 17. MAI, Ltd. (“MAI, Ltd.”) is an alien corporation organized under the laws of the Republic of Korea with its principal place of business in Korea. (DX 265; DX 266.) MAI, Ltd. was created in March 1991. (10 Tr.2d 1036:14-17 (Joy Lee); DX 265 at ¶ 7; DX 266 at ¶ 7.) 18. MAI, Ltd. manufactures the Game. (10 Tr.2d 1039: 2-4 (Joy Lee).) 19. Jerrold Lee and his family own MAI, Ltd. (10 Tr.2d 1037:14-15 (Joy Lee).) 20. Best General Merchandise Corp. (a/ k/a “Chusik Hosea Kyongyong” and Maru Joint Stock Trading Company) (“Best General”) is an alien corporation organized under the laws of the Republic of Korea with its principal place of business in Korea. (DX 246; DX 247; DX 268A.) 21. Jaeil Kim owns Best General and is a friend of Joy and Jerrold Lee. (10 Tr.2d 1039:15-24 (Joy Lee).) 22. Best General is affiliated with MAI. (DX 243.) 23. Joy Lee used her office as an American contact office for Best General’s U.S. business operations. (10 Tr.2d 1073:9-25 (Joy Lee); DX 245.) 24. Third party defendant Samuel Petrovich resides in Wisconsin and is President of Select Creations, Inc. (“Select”). (Answer and Defenses of Counter-defendants Select Creations, Inc., Sam Petrovich and Thomas Meisenheimer (“Select Ans.”) ¶ 10; DX 406.) Petrovich is the sole owner of Select. (3 Tr. 468:8-10 (Petrovich).) 25. Third party defendant Thomas Meisenheimer resides in Wisconsin and is an employee of Select holding the title of Vice President of Marketing and New Product Development. (Select Ans. ¶ 11; DX 406, at 2; DX 407.) 26. Plaintiff/third party defendant Select is a Wisconsin corporation with its principal place of business in Milwaukee, Wisconsin. (Select Ans. ¶ 12.) Select also maintains an office in California. (Select Ans. ¶ 12.) 27. Select’s California office, Select Creations West, employs Robert Hooper (“Hooper”) and John Burke (“Burke”). (1 Tr. 170:4-6 (Paliafito); DX 50.) 28. Hooper is Select’s Executive Vice President. (DX 406, at 1; DX 407.) 29. Burke is Select’s Vice President for Sales. (DX 406, at 1; DX 407.) 30. At one time, Paliafito was the exclusive United States distributor of GRIP BALL, by virtue of a contract with MAI and MCL, and had hired Select to serve as its mass-marketing consultant. (DX 11/11A; DX 65; 1 Tr. 169:9-18 (Paliafito).) B. FACTS RELATING TO REQUESTS FOR ATTACHMENT AND INJUNCTIVE RELIEF 1. Corporate pool 31. The Lees, husband and wife, sell GRIP BALL internationally. Joy is in charge of sales. Jerrold is in charge of manufacturing. (3 Tr.2d 260:18-24 (Joy Lee).) 32. The Lees control MCL, Puff Pac, and MAI Ltd., the Korean manufacturers of the Game. (FF ¶¶12, 15, 18.) 33. The Lees control MAI and Grip Toys, Inc., the sellers of the Game. (FF ¶¶ 5, 6.) 34. Best General shares Korean and U.S. offices with MAI. (FF ¶¶ 80-83.) 35. Joy Lee testified that she created this corporate pool because she did not want to “put ... all eggs in one basket.” That is, if something happened at one facility so that it could not continue to produce the Game, another facility could provide it. (10 Tr.2d 1037:4-9 (Joy Lee).) 2. Evolving corporate names 36. In the mid-1980s, the Lees conducted business in the United States through Best International. (DX 272 ¶ 1.) 37. They later incorporated this business in New York. (DX 257.) 38. The Lees incorporated the business under the name Mantae America, Inc. in New York. (DX 12; DX 272 ¶ 1.) 39. Last year, the Lees changed the name of the business from Mantae America, Inc. to Many Amazing Ideas, Inc. (PFF ¶ 92.) 40. In April 1991, the Lees formed a company, MAI, Ltd., under the laws of Nevada. (DX 262.) 41. In November 1991, they changed the name of MAI, Ltd. to Grip Toys, Inc. (DX 262; DX 263.) 3. Evolving corporate relationships 42. MAI’s contract with Kiddie Wonder states “[Mantae America, Inc.] is the exclusive world-wide distributor of the ... line of removable stickers which are manufactured by [Mantae America, Inc.’s] parent company Mantae Co., Ltd. of Korea----” (DX 250 (emphasis added).) 43. A plaque outside Mantae’s Walnut Office reads “Mantae America, Inc., a branch of Mantae Co., Ltd. Korea.” (DX 251 (emphasis added).) 44. MAI’s company stationery reads “Mantae America, Inc., a division of Mantae Co., Ltd.” (DX 251A (emphasis added).) 45. In September 1991, Joy Lee testified in her deposition in the New Market Concepts case that Mantae Co., Ltd. was owned fifty percent by Mantae America, Inc. (3 Tr.2d 240-41, 45:22-25, 1-22, 1-23 (Joy Lee).) 46. Joy Lee testified to the Court that MAI and MCL were related because she owned fifty percent of MCL and, at the time in question, fifty percent of MAI. (3 Tr.2d 246-47:8-16, 8-11 (Joy Lee).) 4. Lack of corporate formalities 47. Joy Lee is the sole director of MAI. (3 Tr.2d 265:18-20 (Joy Lee).) 48. Joy Lee has held the position of MAI’s secretary, secretary-treasurer, vice president, and president. (DX 59, at 3; DX 118, at 5; DX 11 A, at 1, ¶ 2; DX 272; DX 236.) 49. MAI has had one or two directors’ meetings. (3 Tr.2d 266:2-7 (Joy Lee).) 50. Joy Lee has paid the monthly rent on her residence with MAI funds. (DX 240; 12 Tr.2d 1307:22-24 (Joy Lee).) 51. The New York apartment is a combination of corporate office and apartment from which business is conducted and where Joy Lee stays while in New York in order to save hotel expenses. (12 Tr.2d 1399:21— 1400:9 (Joy Lee).) 52. Joy Lee has bank statements sent to her home. (DX 235 at HAN 5-8.) 53. Joy Lee keeps some business records at home. (DX 490, at 1, numbered paragraph 1.) 5. Lack of capital in the U.S. 54. Mark Paliafito testified Joy Lee told him that MAI “was always running so lean.” That is, it had little or no money in its bank accounts, because it remitted virtually all of its earnings from the United States to Korea. (1 Tr. 185-86:14 — 25, 1 (Paliafito).) 55. Joy Lee testified that she explained to Mark Paliafito why money was sent to Korea. (11 Tr.2d 1115:19 — 1116:17 (Joy Lee).) Joy Lee explained that money had to go to Korea to produce Games for Paliafito to sell. She stated that larger facilities were required and, since mortgages do not exist in Korea, cash was needed to buy the facilities. She also stated that ninety days lead-time was needed to purchase raw materials from suppliers and she needed cash up front to purchase the (velcro) hook and loop fastener from Taiwan. (DX 138/138T, No. 10; 11 Tr.2d 1134:16 — 1135:21 (Joy Lee).) 56. Mark Paliafito overheard conversations of Joy Lee indicating that MAI would bounce checks, and write drafts when there was no money in MAI’s bank account to cover the checks. (1 Tr. 186:14-20 (Paliafito).) 57. Joy Lee testified that the reason checks bounced is because Paliafito made promises to pay money owed to MAI at certain times and did not keep the promises. (12 Tr.2d 1398:3-13, 1399:15-20 (Joy Lee).) 58. Mark Paliafito testified that Joy Lee would demand payment for goods delivered to Paliafito a week after delivery. (1 Tr. 186:23 — 187:1 (Paliafito).) 59. Joy Lee testified that MAI was in need of money because Paliafito was often late in making payments and because MAI had an obligation under Korean law to pay for the Games within a certain period. (10 Tr.2d 1053:15 — 1055:15 (Joy Lee); 11 Tr.2d 1227:8 — 1228:3; 12 Tr.2d 1399:11-20 (Joy Lee).) 60. In 1991 and into 1992, MAI frequently had negative balances in its U.S. bank accounts. (DX 3500, Tab A.) 61. Joy Lee testified that the reason MAI was overdrawn was that Paliafito had promised to pay at certain times and she had relied on payment, which was not forthcoming. (6 Tr.2d 610:3 — 614:10 (Joy Lee).) 62. As of March 31, 1991, MAI had approximately $200,000 total in its U.S. bank accounts. (DX 3500, Tab A, at 4.) 63. MAI generated $40,000,000 in U.S. sales. (DX 496, at 1.) 64. Additionally, in 1991, Joy Lee obtained $1,000,000 from Paliafito in payment for the exclusive U.S. distribution rights. (PFF ¶¶ 193, 194, 195, 197.) However, Joy Lee testified that the $1,000,000 was to expand facilities to manufacture the Game. (11 Tr.2d 1113:15-24 (Joy Lee).) 65. Paul Moss drafted a summary of pending Target Stores orders for GRIP BALL for December 1991 through mid-1992 totaling approximately $2,300,000. (DX 472.) 66. Scott Hupe estimated that Paliafito would have about $1,000,000 in profits from a 600,000 Game order from Target. (2 Tr.2d 152:1-6 (Hupe).) 6. Inconsistent statements and misstatements regarding corporate structure 67. In response to a customs inquiry, Mantae represented that “Mantae America, Inc. and Mantae Co., Ltd. are not related.... Similarity of the name is coincidental.” (DX 253.) 68. Joy Lee testified that the letter to Customs by Kevin Lee was written without her knowledge; she was in Korea at the time. DX 253 was prepared by Kevin Lee, an employee of MAI who had been in the United States for only three months, and spoke very little English. David Huh translated the document to English from Korean. (3 Tr.2d 237:1 — 238:19; 12 Tr.2d 1285:3-17 (Joy Lee).) MAI has contacted Customs after inquiries from that department. (12 Tr.2d 1476:7 — 1477:6; 1477:20-25; 1478:24— 1479:9; 1480:4-6 (Levesque).) Paliafito is also dealing with Customs to clear up any problems they may have. (3 Tr. 449:24— 450:4 (Paliafito).) 69. MAI represented that it was not related to other Mantae entities on 191 import transactions. (DX 2501.) 70. In fact, MAI and MCL are related. (FF ¶¶ 5, 12, 17.) 71. Joy Lee testified that Best General was not related to MAI. (3 Tr.2d 276:14-20 (Joy Lee).) 72. On March 3, 1992, Kenneth L. Bressler, MAPs attorney, submitted a letter to the Court stating “[t]he fact is that Best General is unrelated to MAI and the Lees.” (DX 242.) 73. MAPs international marketing vice-president, Eddie Kim, wrote to Yacov Comfort, a GRIP BALL customer, that Best General was an “affiliated company with” MAI. (DX 243.) 74. Steve Lim of MAI filed a fictitious business name statement for “Best General Merchandise USA,” listing the same address as that of Joy Lee’s home. (DX 245; 3 Tr.2d 279-82:21-25, 1-25, 14-25, 1-8 (Joy Lee).) 75. DX 55, DX 129, DX 130, and DX 131 are letters to Paliafito from Joy Lee written on Best General Merchandise, Inc.’s stationery. At the bottom of the stationery, a San Jose, Costa Rica office is indicated. The stationery also indicates the existence of a Los Angeles office at 20254 Paseo Del Prado, Walnut, California, with phone and fax numbers of (714) 594-9828 and (714) 594-8597, respectively, and the existence of a New York office, at 990 Avenue of the Americas, Suite 15-E, New York, New York, with phone and fax numbers of (212) 239-0028 and (212) 239-0058, respectively. (DX 55; DX 129; DX 130; DX 131.) 76. MAPs address is 20254 Paseo Del Prado, Walnut, California; its phone and fax numbers are, respectively, (714) 594-9828 and (714) 594-8597. (See, e.g., DX 9.) 77. Mantae’s former New York office had the address 990 Avenue of the Americas, Suite 15-E, New York, New York, with phone and fax numbers of (212) 239-0028 and (212) 239-0058, respectively. (DX 251A.) Mantae’s current New York office, at 990 Avenue of the Americas, Suite 18-S, New York, New York, has the same phone and fax numbers. (See, e.g., DX 5.) 78. The address for Best General Merchandise, Inc. on DX 54 and DX 55, and the Korean address shown for Best International Corporation, MAI’s predecessor, on DX 56, are the same. (DX 54; DX 55; DX 56.) 79. Joy Lee testified that it is common for Korean companies to use addresses and phone numbers of friends’ offices abroad as “contact” offices because its easier for a U.S. buyer to call an office in the U.S. than to call Korea. (10 Tr.2d 1073:9-25 (Joy Lee).) 80. Joy Lee testified that Jaeil Kim, Best General’s owner, was not employed by Mantae Mexico. (2 Tr.2d 212:1-2 (Joy Lee).) 81. MAI addressed an invoice to Jaeil Kim at Mantae Mexico. (DX 269.) 82. On July 16,1991, Kenneth Bressler, a MAI attorney, filed a certificate of interest pursuant to local rule in the action Mantae America, Inc. v. Drybranch, Inc., No. 91 Civ. 4822 (S.D.N.Y.) (McKenna, J.), in which he certified that MAI had no “corporate parents, subsidiaries, or affiliates.” (DX 255.) 83. On December 6, 1991, John Santalone, a MAI attorney, filed a certificate of interest pursuant to local rule in the action Bai v. Tanking Imports, No. 91 Civ. 6896 (S.D.N.Y.) (Motley, J.), in which he certified that MAI had no “corporate parents, subsidiaries, or affiliates.” (DX 256.) 84. Bert Levesque, MAI’s chief financial officer, signed an employment agreement with “Mantae America, Inc. and its affiliated Companies.” (DX 157 (emphasis added).) 85. In August 1991, MAI’s attorneys filed a certificate of amendment with the Secretary of State of New York in which Mantae America, Inc. changed its name to “Many Amazing Ideas, Inc.” (DX 59.) 86. In October 1991, two months later, MAI’s same attorneys represented to the Supreme Court of New York that MAI’s name was Mantae America, Inc. (DX 49.) 87. The Lees represented that MAI was a California corporation to Paliafito. (DX 11A.) 88. In fact, MAI is a New York corporation. (PFF ¶ 39.) 89. Keith Nowak wrote a letter to Thomas Handler, Paliafito’s attorney, stating that Joy and Jerrold Lee together owned fifty percent of MAI and fifty percent of MCL. (DX 119 ¶ 18.) 90. Joy Lee testified to the Court that Jerrold Lee never owned any part of MCL. (2 Tr.2d 221-22:16-25, 1-2 (Joy Lee).) 91. The Lees insisted that Paliafito give them post-dated checks in the amount of nearly $500,000, payable to Jong Sik Lee, personally, which were then sent to Korea. (DX 42.) 92. Joy Lee wrote a schedule, (DX 41), which showed payments that were due from Paliafito to Mantae. It indicated the date the check should be dated, the check amount, and to whom it should be made payable. It showed the following dates, check amounts, and payees: (1) May 24, 1991, one cheek for $110,000 and one check for $80,000, payable to Mantae America Inc.; (2) May 31, 1991, one check for $49,000, payable to Jong Sik Lee; (3) June 7,1991, two checks for $49,000 each payable to Jong Sik Lee; (4) June 14, 1991, two cheeks for $49,000 each, payable to Jong Sik Lee; (5) May 31, 1991, one check for $26,877.40, payable to Jong Sik Lee. (DX 41.) 93. Joy Lee gave DX 41 to Paliafito. She instructed Paliafito to make the .checks payable as shown on DX 41, and Paliafito did so. (2 Tr. 216:5-12 (Paliafito).) 94. DX 42 comprises copies of ten checks made payable to Jong Sik Lee by Paliafito. All are in amounts under $50,000, with most being $49,000 or $49,500. (DX 42; 2 Tr. 216:18-24 (Paliafito).) 95. Mark Paliafito testified that Mantae typed out and delivered to Cho Hung Bank Paliafito checks drawn in amounts just under $50,000. (DX 87; 3 Tr. 442-43:18-25, 1-17 (Paliafito).) 96. Mantae never told Paliafito why they typed the checks out in amounts under $50,-000. (3 Tr. 444:1-4 (Paliafito).) 97. These checks were made payable to Jong Sik Lee because Joy Lee told Paliafito to do so. Some checks were actually made out by Mantae. (2 Tr. 217:11-15 (Paliafito).) 98. The Paliafito checks made payable to Jong Sik Lee totaled $469,877.40. (DX 42.) 99. The Paliafito checks made payable to cash and delivered to Mantae totaled $2,459,-621.77. (DX 43.) 100. Mark Paliafito testified that Joy Lee said the checks were made payable to cash because MAI needed to get money back to Korea in a hurry, and they wanted to avoid depositing the checks in their U.S. accounts. (2 Tr. 219-20:21-25, 1 (Paliafito).) 101. Joy Lee testified that the reason MAI asked for checks made out to cash was so it could get cashier’s checks without delay. Joy Lee testified that the reason cashier’s checks were required was because Paliafito was late in.making payments. (MAI EXS 53,54; 12 Tr.2d 1392:21 — 1393:14; 1394:8-24 (Joy Lee).) Paliafito complained to Eddie Kim about the problem, but continued to pay in this manner. (2 Tr. 269:21 — 270:19 (Paliafito).) When Joy Lee received from Paliafito checks made payable to cash, she or someone else at Mantae would go to the bank, usually accompanied by someone from Paliafito, to get cashier’s checks. The checks may have been sent to Korea. (2 Tr. 221:2-10 (Paliafito).) 102. Mark Paliafito testified that when he accompanied MAI personnel to Bank of America to have the Paliafito checks, previously made out to cash, changed into cashier’s checks, the cashier’s checks were made out to either MAI or cash. (2 Tr. 244:18-24 (Paliafito).) 103. Mark Paliafito believes that MAI took the money from the U.S. and put it in Korean or other foreign banks because MAPs accounts in America never had any money in them, MAI bounced some cheeks, and Joy Lee was prodding Paliafito for money every day. (2 Tr. 245:5-9 (Paliafito).) 7. Risk of Joy Lee fleeing the United States and failing to honor a judgment 104. As Paliafito notes: (1) the GRIP BALL fad may disappear from the United States in the near term, (8 Tr.2d 781-82:19-25, 1-9 (Carlson)); and (2) GRIP BALL constitutes ninety percent of MAI’s U.S. income. (4 Tr.2d 321:14-17 (Joy Lee).) 105. However, Joy Lee has lived in the United States for fourteen years and testified that she does not intend to leave. (10 Tr.2d 1029:11 — 1031:22 (Joy Lee).) Her children are U.S. citizens, and live and go to school in California. (10 Tr.2d 1029:13 — 1030:9 (Joy Lee).) In the period since Paliafito filed its attachment motion, he has increased the size of its warehouse. Joy Lee has bought a house for $265,000. (12 Tr.2d 1303:21— 1304:1 (Joy Lee).) 106. After being threatened with litigation, Joy Lee told Don Murray, president of New Market Concepts: “You stupid American, don’t you know that we [Joy and Jerrold Lee] [are] here on green cards and even if you win your case we’ll take your money and leave.” (4 Tr.2d 332:1-8 (Murray).) Harry Gates corroborated Murray’s testimony on this point. (4 Tr.2d 335-40:5-25, 4-25, 1-25, 1-25, 1-25, 1-21 (Gates).) C. POSSIBLE FRAUDULENT PROCUREMENT OF PATENT 107. In 1988, Aljac Enterprises, Inc. imported the Game (called “Magic Catch”) into the United States from Sewon Co., a Korean company. (Summary of Relevant Testimony from the Deposition of Allan Genauer (“Genauer Summary”). ¶7; 5 Tr.2d 442:12-25 (Genauer); DX 700.) Genauer was the one who gave the Game the name “Magic Catch.” (5 Tr.2d 463:15-17 (Genauer).) 108. Aljac placed the Game on sale in the United States that same year. (Genauer Summary ¶7; 5 Tr.2d 443, 472:1-3, 16-22 (Genauer); DX 701; DX 702.) 109. Genauer testified that Aljae sold two versions of the Game in 1988. (Genauer Summary ¶¶ 7, 8, 13, 14; 5 Tr.2d 449-50:20-25, 1 (Genauer).) He stated that the first version of the Game’s “catch pad” consisted of: (1) a concave plastic plate, with a slight extrusion (or hump) at the center; (2) a small piece of foam, attached by glue to the inside center of the plate; (3) a larger foam pad; which was backed by a cotton muslin sheeting and which was the same size as (4) the front layer of hook and loop touch listeners, which covered the entire face of the plate; and (5) a rim or ring that surrounded the periphery of the plate and held the “catch pad” together. He stated that the “catch pad” of the second version of the Game sold by Aljae in 1988 was constructed in the same manner, with the exception that the plastic plate lacked the slight extrusion of the first version and had the outline of a baseball glove etched onto it. (Genauer Summary ¶¶ 5, 8, 13; 5 Tr.2d 450:2-20 (Genauer); DX 704A; DX 705A.) 110. Ywo Chul, former president of Se-won G.M. Co., Ltd., the Korean manufacturer of MAGIC CATCH, testified at another proceeding that the first version of the Game had two problems: (1) “sticking was poor;” (2) “when object was thrown, rim re-bounced;” and (3) “at the back of plate, the color of blue ink is stained because it is insufficiently colored.” (MAI EX 154, at 2-5.) 111. However, Grenauer testified that the defect was “in regard to the cosmetic end of it” and that “[tjhere was no defect in the construction or in the usage of the product.” (5 Tr.2d 474:9-17 (Grenauer).) 112. Ywo Chul testified that the second version changed the shape, improved the “sticking function,” changed the rim construction so as not to disengage and remedied the discoloration problem. (MAI EX, at 10.) Ywo Chul testified that the second version was based on improvements suggested by Jerrold Lee. (MAI EX, at 7-9.) 113. In August 1988, Joy Lee’s Best International bought a game from Aljae Enterprises, Inc. (5 Tr.2d 445-46:16-25,1-10 (Genauer); Genauer Summary ¶ 14; DX 703.) 114. In 1988, Genauer applied for a United States patent on the Game, based on documents provided to Genauer by the president of Sewon Corporation. This patent application was later abandoned. (5 Tr.2d 452-53:13-25, 1-14 (Genauer); DX 60 Exhibit 7.) 115. Joy Lee testified that prior to April or May of 1989, she was selling the version of the Game with a hump on the back of the catch pad. (10 Tr.2d 1067:7-17 (Joy Lee).) 116. Keith Nowak handled Joy Lee’s patent application. (6 Tr.2d 619-20:23-25, 1-4 (Joy Lee).) 117. On March 8, 1990, Nowak filed with the United States Patent and Trademark Office (“PTO”) Joy Lee’s application for a patent on the Game. (DX 104, at PTO 3-25.) This application was transmitted to the PTO by the United States mails. (DX 104, at PTO 25.) 118. As part of her application, Joy Lee submitted an inventor’s declaration that she is “the original, first and sole inventor” of the Game. (DX 104, at PTO 18-19.) 119. In response to the PTO’s rejection of Joy Lee’s patent application on grounds of obviousness, Nowak twice filed with the PTO correspondence amending the claims in the patent application. (DX 104, at PTO 30-38, PTO 70-80.) The first, if not both, of these correspondences with the PTO, was placed for delivery with the United States mails. (DX 104, at PTO 38.) 120. In Nowak’s response to the second rejection, and to a patent protest that cited (for the first time in the history of the patent prosecution as established by the file wrapper) two Korean patent documents, he differentiated Joy Lee’s game from other prior art solely on the grounds that prior art did not combine two intermediate flexible layers, a rigid concave back, a touch fastener, and a retaining ring. (DX 104, at PTO 72-77.) 121. Nowak distinguished the Korean Utility Model, filed in Korea by Yu Chul and Sewon GM Corporation, solely on the grounds that the Korean Utility Model “does not show, or suggest, the use of applicant’s intermediate flexible layers, nor any of the remaining elements [of the claims in the application]. It does appear to provide some type of ‘cover ring.’ However, there is no teaching with respect to the purpose of the ‘cover ring’____ [T]here is no teaching of the multiple layer structure of applicant’s invention.” (DX 104, at PTO 77.) 122. In conjunction with Nowak’s response, Joy Lee submitted a declaration in which she stated “that she does not know, and does not believe that the invention of the instant application has been in public use or on sale in this country ... for more than one year prior to this application.” She also declared that on about May 10, 1989, she conceived of “her invention” and described it in writing, that it was subsequently reduced to practice, and that “[sjales of the completed game, known by the name ‘Scateh’ or ‘Magic Catch Game’ were made as early as July 18, 1989.” (DX 104, at PTO 81-82, 63; DX 106.) 123. The PTO Examiner filed a “Notice of Allowability” on December 7, 1990, in which he determined to be true Nowak’s representations regarding the Korean Utility Model: he stated that the “reference discloses a cover ring (retaining ring) 2, but does not disclose the overall combination, including the multi-layer structure as recited in lines 5-14 of claim 1.” (DX 104, at PTO 65.) 124. In the “Petition to Make Special under 37 C.F.R. § 1.102(d),” transmitted to the PTO by means of interstate facsimile, Nowak warranted to the PTO that he “ha[d] made or caused to be made a careful and thorough search of the prior art or has good knowledge of the pertinent prior art” and that he believes all claims are allowable. (DX 104, at PTO 91-92.) 125. On February 26, 1991, the United States Patent & Trademark Office granted to Joy Lee United States Letters Patent No. 4,995,617 on the Game. (DX 110.) 126. The catch pad described in the patent is “a multilayer mitt” composed of: (1) “a rigid concave rear layer;” (2) “a first intermediate flexible layer,” composed of polyurethane foam, which occupies “a surface area less than the surface area of said rear layer;” (3) “a second intermediate flexible layer,” also composed of polyurethane foam, which occupies “a surface area substantially equal to the surface area of said rear layer;” (4) “a front layer having substantially all of its front surface defined by a multitude of irregular filamentary formations;” (5) which was “retained in place by a retaining ring with an inner edge of said retaining ring extending over a portion of said front layer.” (DX 110, column 4, claims 1, 3.) 127. The Game, as imported and sold by Genauer in 1988 and as purchased by Joy Lee in 1988, appears to have the same features as the “invention” for which Joy Lee obtained U.S. Patent No. 4,995,617. (DX 704; DX 705; DX 110, column 4, claim 1, 3; compare FF ¶ 109 with FF ¶ 126.) 128. Sometime in 1991, Genauer had a telephone conversation with Joy Lee. During this conversation, Joy Lee acknowledged that Genauer was the first to import the Game to the United States, but said that Genauer did not sell the Game anymore and that she had taken over the Game and spent money improving it. (5 Tr.2d 450-51:21-25, 1-24 (Genauer).) 129. In this case, Joy Lee testified that she developed the game in 1988 and 1989, and that she started selling her patented version of Grip Ball in the United States between April and May of 1989. (10 Tr.2d 1058, 1067:3-5, 7-10 (Joy Lee).)' D. POSSIBLE IMPROPER USE OF VELCRO® NAME . 130. Throughout 1990 and 1991, MAI represented that the Game included two “Velcro® Grip-Mitts™” and a Velero™-covered ball. (DX 23, DX 24; DX 25, at 1, ¶ 1, at 2, ¶ 2 (press release approved by MAI and its attorneys, 1 Tr. 181-82:19-25,1-9 (Paliafito).) 131. “Velcro®” is a hook and loop fastener manufactured by Velcro Industries B.V. (“VIBV”). VIBV, through itself and its licensees, has maintained the exclusive right to use the trademark “Velcro®” in connection with its products. (DX 26, Exhibit A 12.) 132. VIBV has never granted a license to the Lees, MCL, or-MAI to use the registered trademark “Velcro®” in connection with the Game or any other product. (DX 26, at 2, ¶ 5.) 133. Moreover, the Game, as manufactured by MCL and imported into the United States by the Lees and MAI, does not contain, nor has it ever contained, Velcro® brand touch fasteners. (DX 26, at 2, ¶5.) 134. The packaging inserts falsely stating that the product contained Velcro® were produced by Mantae in Korea and shipped to Paliafito with the Games'. (1 Tr. 178-80:14-25, 1-25, 1-12 (Paliafito).) Joy Lee testified that she was buying material from a company that represented that the material was Velcro. (12 Tr.2d 1365:15 — 1268:11 (Joy Lee).) 135. MAI EX 71 is a supplier’s invoice which indicates that MAI received “Velcro” product. However, the invoice does not indicate whether MAI received a trademarked Velcro product or a generic velcro hoop and loop material. (MAI Ex. 71); 12 Tr.2d 1365:15 — 1368:11 (Joy Lee).) E. EVENTS LEADING UP TO THE EXECUTION OF THE EXCLUSIVE DISTRIBUTORSHIP AGREEMENT . 136. The patented GRIP BALL Game was first sold by MAI through regional distributors who were assigned various geographic areas of the' country. Joy Lee testified that because of the growing success of the Game, she determined that one national distributor would be needed. (10 Tr.2d 1067:18 — 1068:16 (Joy Lee).) 137. Joy Lee testified that MAI sought a national distributor with experience and expertise as well as adequate financial backing to create and then fill demand. (MAI EX 75, at 1; 10 Tr.2d 1069:13 — 1070:3 (Joy Lee).) 138. Joy Lee gave the regional distributors the opportunity to submit marketing proposals in order to obtain the national rights. (10 Tr.2d 1069:13 — 1071:9 (Joy Lee).) MAI also received interest from Hasbro. (11 Tr.2d 1080:17-23; 1083:7-24 (Joy Lee).) 139. Manufacturing in Korea requires that each of the three factories acquire material from the supplier pursuant to a local Letter of Credit (“LC”). (10 Tr.2d 1059:3-25 (Joy Lee).) 140. Thereafter, the finished product is forwarded to an exporter who also must pay pursuant to a local Letter of Credit. In the instance of manufacturing the Game in Korea, the exporter and manufacturer could be the same party. (10 Tr.2d 1060:1-21 (Joy Lee).) 141. Joy Lee testified that in order to properly manufacture, lead time is required. The process begins upon receipt of an LC from the buyer. Normally, thirty to ninety days are required to manufacture and export prior to receipt of the LC. Suppliers also require at least thirty days lead time. In addition, transfer of goods to the U.S. normally takes about thirty days, which includes twenty days on the water, plus five days of customs clearance. (10 Tr.2d 1065:15— 1066:15 (Joy Lee).) 1. Paliafito seeks to distribute the Game 142. In December 1990, Mark Paliafito and Mike Barker and their attorneys, George Johnson and Richard Hart, through Paliafito’s predecessor in interest, WAAC, began negotiations with the Lees, Nowak, MCL, and MAI to obtain the exclusive rights to distribute and market the Game in the United States. (1 Tr. 126-27:14^-22,1-12 (Paliafito).) 143. Initially, the Paliafito group proposed to proceed by way of joint venture arrangement with Keith Andes and his company, Andes America, Inc., a fact known by the Lees, MCL, MAI, and Nowak. (10 Tr.2d 1078:11-25 (Joy Lee).) 144. Andes America, Inc., which is owned and operated by Keith Andes, was one of the regional distributors. Andes had an eleven-state region comprised of Alabama, Tennessee, North Carolina, Kentucky, Ohio, Indiana, Illinois, Michigan, Wisconsin, Arkansas and Missouri. (6 Tr.2d 488:22— 489:6; 491:12-24 (Andes).) 145. In 1990, Andes sold the Game to Paliafito, (6 Tr.2d 489:22 — 491:1 (Andes)), which in turn sold the Game from carts located in shopping malls. (1 Tr. 125:4— 126:5 (Paliafito).) 146. In early 1991, Keith Andes, along with Hardtke and Paliafito, discussed forming a joint venture (“Andes/Paliafito”) to obtain the national distribution rights to the Game from MAI. (6 Tr.2d 492:4 — 493:15 (Andes).) 147. In order to obtain the rights from MAI, Andes/Paliafito prepared a marketing proposal setting forth the responsibilities each participant would have, as well as a plan for marketing the GRIP BALL Game on a national level (the “Marketing Plan” or the “Plan”). (MAI EX 1; 2 Tr. 334:14-16; 335:1 — 337:27 (Paliafito).) 148. The stated purpose of the Marketing Plan was “to focus on the intention of Andes/Paliafito America, Inc. to successfully market the [Game] ... and to acquire and maintain exclusive U.S.A. distributing and marketing rights ...” (MAI EX 1, at 1.) 149. The Marketing Plan was based on a draft plan prepared by Scott Hupe. (MAI EX 87; 4 Tr. 651:5-13 (Hupe).) 150. Andes testified that the final version of the Plan was reviewed by Paliafito prior to its submission to MAI. (6 Tr.2d 499:1-3 (Andes).) 151. The Marketing Plan presented to MAI was signed by Keith Andes, Mark Paliafito, Terry Hardtke, Scott Hupe and Mike Barker. (MAI EX 1, at 1; 1 Tr. 136:23— 137:4 (Paliafito).) Joy Lee testified that she relied on the Plan in entering into the Agreement. (10 Tr.2d 1091:15 — 1092:7 (Joy Lee).) 152. Manufacture of the Game takes place in Korea in three different locations. Joy Lee testified that the reason for the separate corporate entities is as follows. The Game was initially manufactured by Puff Pac, which is owned by Jerrold Lee and his family. Mantae Company, Ltd. was the second facility to manufacture the Game. Prior to the time MCL manufactured the Game, MCL was entirely owned by Jae-Duck Kim. Fifty percent of the company’s stock was assigned to Joy Lee when MCL started manufacturing the Game. At the same time, the Lees started a company in the U.S. called Mantae America, Inc., which was then owned by Joy and Jerrold Lee. A separate company was organized in the U.S. because it is owned by different people. In March 1991 MAI, Ltd. was formed to manufacture the Game. It was formed because the other facilities were too small and because Jerrold Lee was overseeing manufacturing in Korea and wanted to have quality control over all the facilities. Joy Lee also wanted to avoid the potential problem of having the entire manufacturing process halted if one of the factories had a problem. (10 Tr.2d 1033:17— 1037:15 (Joy Lee).) 153. The Marketing Plan was presented to MAI on or about January 27, 1991, at a meeting held in California (the “January 27th Meeting”). Scott Hupe, who was represented to have had six years of experience in the industry, made a presentation of the group’s marketing strategy and presented Joy Lee with the Plan. (MAI EX 1, at 2; 1 Tr. 133:22 — 134:23 (Paliafito).) 154. Joy Lee reviewed the Marketing Plan at the January 27th Meeting, as reflected on her original version of the Plan, which has her contemporaneously hand-written notations throughout. (MAI EX 1, at 1, 4, 6, 9, and 11; 10 Tr.2d 1094:13-17 (Joy Lee).) 155. The Marketing Plan stated that the GRIP BALL Game would be distributed out of Tennessee by Andes and out of California by Hardtke. (MAI EX 1, at 2, 3 (Andes).) 156. Joy Lee testified that she had had previous experience with Andes and felt comfortable with his knowledge of the product. Joy Lee also stated that she knew Hardtke, had visited his facility in California and was comfortable with his operation. (10 Tr.2d 1100:22-25; 1101:1-25; 1102:1 (Joy Lee).) 157. Joy Lee had not met anyone else in the Andes/Paliafito group prior to the January 27th Meeting. (10 Tr.2d 1075:6-10 (Joy Lee).) 158. Paliafito believed that “it [was] extremely important that the talents of Mr. Hardtke and Mr. Andes are integrated into [its] plans. Their active' role in this massive marketing initiative is crucial to the project’s success.” (MAI EX 87, at 8; 1 Tr.2d 17:5— 18:25 (Hupe).) 159. Paliafito also planned to utilize warehouses in California, Tennessee and Wisconsin to effectively manage distribution. (MAI EX 87, at 12.) 160. The Plan also set forth a method for selling the Game. To limit cash flow problems, sales would be concentrated on small retail (“mom and pop”) dealers because “cash flow is usually immediate with these accounts.” (MAI EX 1, at 6.) 161. According to Mike Barker, a member of the Andes/Paliafito group and a principal of Paliafito, the “toy fair, coupled with [Paliafito’s] concern for the small mom and pop stores, will be the driving force behind our success in this venture — you know that, I know that and Terry knows that.” (MAI EX 149, at 1.) 162. Joy Lee testified that cash flow plan was crucial to her because if sufficient cash flow was not present, she was concerned that the business would fail. (10 Tr.2d 1084:19— 1085:17 (Joy Lee).) 163. Joy Lee testified that she asked at the January 27th Meeting how the Andes/Paliafito Group would finance the distribution of the Game and was told that financing would not be a problem. (10 Tr.2d 1089:14-21 (Joy Lee).) 164. According to the Marketing Plan, Mark Paliafito was to be “the investment vehicle through which all initial and future financing related to all areas.” [sic] (MAI EX 1, at 3.) 165. Joy Lee testified that Mark Paliafito was represented to be from a family worth $4,000,000 to $5,000,000. (10 Tr.2d 1089:14-25; 1090:1 — 1091:4 (Joy Lee).) 166. Scott Hupe stated that “we knew that Mr. Paliafito could finance the endeav- or.” (1 Tr.2d 15:18-19 (Hupe).) 167. On March 1,1991 Paliafito drafted a press release which states in part: “Lee, who turned down sizable offers from other major companies, said, T feel very comfortable in the ability of the Paliafito Organization financially and from a sales and marketing perspective. I was hoping to find a small company with the resources that can compete with the majors.’ ” (MAI EX 75, at 1, ¶ 4.) 2. January 1991 meeting 168. On January 27 or 28,1991, representatives of the proposed joint venture, Andes/Paliafito America, Inc., met with Joy Lee, Howard Finelt, Keith Nowak, and others in Walnut, California to negotiate an exclusive distribution agreement for Grip Ball. (1 Tr. 127:13-22 (Paliafito).) 169. Prior to this meeting, on January 23, 1991, Joy Lee sent a facsimile transmission, (DX 9), to Keith Andes enclosing a proposed contract. In this contract, Joy Lee represented that: (a) Mantae America was a California corporation; (b) she owned the U.S. patent rights to GRIP BALL; (c) the Game employed “Velcro (owned by 3-M Company) in a mitt-like device and a Velcro tennis ball;” and (d) the Lees, MCL and MAI intended to grant Andes and the Paliafitos the complete marketing and distribution rights for the sale and distribution of the Game. (DX 9, at 1, ¶¶ 1, 2, 7 (numbered paragraph 2).) 170. This draft contract, (DX 9), was transmitted by facsimile from Andes to Mark Paliafito and was in his possession and was used during the January meeting as the basis for negotiation. (1 Tr. 130-33:21-25,1-25,1-25, 1-7 (Paliafito).) 171. Mark Paliafito testified that during the course of the January meeting, Joy Lee represented to the Andes/Paliafito group that she had invented GRIP BALL and that Joy Lee never indicated to the group that she had previously purchased the Game from Aljac Enterprises. (1 Tr. 128:11-23 (Paliafito).) 172. At the meeting, MAI presented a summary to Paliafito representing that MAI had sold more than 500,000 sets of GRIP BALL in 1990. (DX 8; DX 118, at 2; 1 Tr. 130:3-9 (Paliafito); 4 Tr.2d 347-48:11-25, 1-6 (Joy Lee).) Nowak later faxed a second copy of this document to Paliafito’s attorney, Thomas Handler. (DX 118, at 2.) 173. Edward Kim and Jerrold Lee prepared the 1990 sales summary. This document was used during Mantae’s negotiations with Paliafito. (4 Tr.2d 350-51:15-25, 1-13 (Joy Lee).) 174. Edward Kim testified that Mantae sold “maybe 200,000” units in 1990. (4 Tr. 352-53:9-25, 1 (Edward Kim).) 175. Kim based this statement on representations that Joy and Jerrold Lee made to him at the time that Mantae was negotiating with Paliafito in early 1991. (4 Tr.2d 353:1-10 (Edward Kim).) 176. Mark Paliafito testified that in reliance on the representation that Mantae had sold 500,000 Games in 1990, Paliafito entered into the Agreement and paid $1,000,000 for the exclusive United States rights to GRIP BALL. (2 Tr. 389-90:17-25, 1-6 (Paliafito).) Andes testified that he cannot recall whether Mark Paliafito cared about the 500,000 figure. (6 Tr.2d 528:7 (Andes).) 177. Throughout the negotiations, Mantae represented that it intended to grant Paliafito the exclusive rights to market and distribute the Game in the United States. (DX 9, numbered paragraph 2; DX 11A § 1.) 178. In notes labeled “Andes Group,” (DX 273), Joy Lee wrote of a $1,000,000 purchase price and stated “when we sign with Hasbro we will refund $500,000.” (DX 273; 4 Tr.2d 356-57, 359:24-25, 1-14, 1-20 (Joy Lee).) 179. Joy Lee testified that she and Mark Paliafito discussed the possibility of MAI and Paliafito, as a team, using Hasbro to distribute GRIP BALL. She stated that if that occurred, MAI would refund $500,000 to Paliafito and Paliafito would receive one-half the revenues from GRIP BALL and concentrate on other products for MAI. (4 Tr.2d 359:1-20; 11 Tr.2d 1181:8-10 (Joy Lee).) 180. During the meeting, the parties negotiated the minimum unit purchase requirement. Hupe testified that Mantae wanted a high minimum unit purchase requirement (3,000,000 — 5,000,000) while Paliafito desired a lower requirement (800,000). (4 Tr. 657-58:17-25, 1-15 (Hupe).) 3. Due diligence issue 181. There were questions as' to Joy Lee’s ownership of the Patent. (MAI EXS 150, 151, 153; 6 Tr.2d 505:4-6; 506:21— 509:15; 519:25 — 520:4; 521:22 — 522:5; 522:13 — 523:19; 524:15 — 526:7 (Andes).) 182. The Andes/Paliafito Group retained a patent attorney, one Alan Wheeler, to review the' Patent, (2 Tr. 299:24 — 301:7 (Paliafito)), and to investigate claims made by Aljac against the Patent. (MAI EX 150, No. 10; MAI EX 151, at 2; 6 Tr.2d 511:14-23; 513:17 — 514:6; 520:15-18; 522:13-22 (Andes).) Handler, the partner of Richard Hart, Paliafito’s attorney and later President, was given the responsibility of following up on the issue. (6 Tr.2d 511:14-23; 513:25— 514:10 (Andes).) 183. There were also questions as to MAI’s finances; Andes/Paliafito wanted financial statements from MAI, but MÁI rer fused to provide them, believing such information to be irrelevant since it was Andes/Paliafito that had financial obligations, not MAI. (6 Tr.2d 509:16-25; 520:11-14 (Andes); 12 Tr.2d 1298:14 — 1299:10 (Joy Lee).) 184. Andes wished to verify the accuracy of MAI’s statement that it had sold 500,000 games in 1990. (6 Tr.2d 515:1 — 517:12 (Andes); MAI EX 152.) 185. Andes also wanted to verify Joy and Jerrold Lee’s integrity. (MAI EX 153, at 1; 6 Tr.2d 525:21 — 526:3 (Andes).) 186. According to a February 5, 1991 letter from Paliafito, these issues were material to the deal going forward. (MAI EX 153, at 1.) 4. February due diligence 187. On February 6, 1991, Keith Nowak wrote to Paliafito’s attorney, Thomas Handler, refusing to give full disclosure of Mantae’s financial condition. He stated that Mantae was a closely-held corporation and that its owners were quite sensitive about the, confidentiality of the company’s business. He did state, however, that Joy and Jerry Lee owned fifty percent of MAI and MCL and that Jae-Duck Kim, a Korean national, owned the other fifty percent of both corporations. Nowak also stated that “Mantae, Ltd.,” a Korean company, actually manufactured the Game. (DX 119 ¶¶4, 5, 18.) 188. A meeting was held in New York on or about February 8, 1992 (the “February 8th Meeting”) for the purposes of conducting due diligence and then signing a letter of intent. (1 Tr. 140:21-25; 142:22-25 (Paliafito); 6 Tr.2d 504:1 — 505:3 (Andes).) 189. Paliafito was represented throughout the negotiations and at the meeting by counsel. (1 Tr. 126:2-5 (Paliafito); 6 Tr.2d 504:11-18 (Andes).) 190. While traveling from Tennessee to the February 8th Meeting, Keith Andes created a list of due diligence issues that needed to be resolved at the meeting. He titled the list “Rats in the Woodpile.” (MAI EX 150; 6 Tr.2d 517:14 — 520:18 (Andes).) 191. Keith Andes testified that it became clear at the February 8th Meeting that Paliafito wanted to proceed with the deal regardless of the due diligence issues. According to Keith Andes, Paliafito was not concerned with the Patent because it really wanted the right to purchase good quality products from MAI. (6 Tr.2d 527:21 — 528:5 (Andes).) 192. In contrast, Mark Paliafito testified that Nowak addressed Paliafito’s patent concerns. He said that after Andes raised the issue of patent validity, “Keith Nowak said to Keith Andes that’s a great story, but I don’t think you have any basis for it ... said don’t worry about the patent ... said it was all malarkey.” 193. Andes also said that he did not recall that Paliafito was concerned with the number of Games claimed to have been sold by MAI. (6 Tr.2d 528:6-7 (Andes).) ■ 194. Andes decided not to proceed with the deal because the due diligence matters and especially the Patent issue had not been resolved. (MAI EXS 91-93.) 195. Instead, Andes was to continue distributing the Game in his eleven-state region. (4 Tr. 773:15-19 (Hupe); 6 Tr.2d 528:8-21 (Andes).) 196. Paliafito felt as if it had been left “high and dry” with no one with experience to operate the national distribution center. (4 Tr. 761:24 — 762:2 (Hupe).) However, Hupe also testified: “Being young and aggressive the five of us in our company did the best we could to run the best distribution facility we could, put the basic principles I’ve up there and you have listed on the board to work and we moved our quota in seven months.” (4 Tr. 763-54:22-55, 1-6 (Hupe).) 5. February 8, 1991: New York meeting 197. On February 8, 1991, another meeting was held between the parties in New York at the offices of Lieberman, Rudolph and Nowak. Prior to, and at, this meeting, Paliafito attempted to obtain financial information about Mantae. Mantae refused to provide such information. (1 Tr. 143:3-8 (Paliafito).) 198. At the February 8th Meeting, Keith Andes backed out of the deal after stating his concern over due diligence matters and patent issues.' (1 Tr. 142-43, 144:22-25,1-2, 13-15 (Paliafito).) ¡ 199. Mark Paliafito informed Joy Lee and Nowak that Andes had decided to withdraw from the deal. Despite his withdrawal, Mantae chose to continue negotiations. Mantae stated that it had no problem with Andes’ departure. (1 Tr. 144,145-46:5-15, 24-25,1-10 (Paliafito); 2 Tr. 412-13:18-25, 1-10 (Paliafito); 10 Tr.2d 1098-99:9-25, 1-14 (Joy Lee).) Joy Lee testified that she understood then that Andes would remain a distributor, as he had been before Paliafito and MAI began negotiating. (4 Tr.2d 360:5-8.) 200. The parties discussed the 1,500,000 unit minimum purchase requirement. Hupe testified that this requirement was negotiated right up until the signing of the Agreement. (4 Tr. 772:9-14 (Hupe).) 201. Hupe testified that the 1,500,000 minimum purchase requirement was based on Joy Lee’s representation that she had sold 500,000 units in 1990. (4 Tr. 658-59:20-25, 1-10 (Hupe).) F. AGREEMENT 202. On February 11, 1991, MAI and MCL, on one hand, and WAAC, on the other hand, signed a letter of intent. (DX 121.) 203. On February 15, 1991, MAI and MCL, on the one hand, and WAAC, predecessor in interest to Paliafito, on the other hand, entered into the exclusive distributorship contract (the “Agreement”). (DX 11A) 204. The Agreement was drafted by Keith Nowak, Mantae’s attorney. (1 Tr. 149, 151:5-10, 5-6 (Paliafito).) 205. The Agreement was executed in Milwaukee, Wisconsin on February 15,1991. (4 Tr.2d 359:21-24 (Joy Lee).) The Lees attended on behalf of Mantae, and Mark Paliafito and Michael Barker attended on behalf of WAAC. The Agreement was signed by Mark Paliafito, for WAAC, and by Joy Lee, for MAI and MCL. (1 Tr. 146-47,151:11-25, 1-2, 14-18 (Paliafito); DX 11 A) 206. The Agreement was signed on or about February 15, 1991. (DX 11A.) 207. The Agreement provides that MAI would grant Paliafito the exclusive right to distribute the Game in the United States subject to certain conditions. (DX 11A). 208. Paliafito was required to purchase a minimum of 1,500,000 units during calendar year 1991 and 3,000,000 units in 1992. (DX 11 A, ¶ 4.) 209. Paliafito was required to pay for the Games either by irrevocable letter of credit or with fifty percent of the purchase price in cash upon order and fifty percent upon delivery. (DX 11A, ¶ 7.1.) The terms of credit could be changed with thirty days written notice. (DX 11A, ¶7.2.) 210. Joy Lee testified that the terms of payment were very important to MAI because it guaranteed payment for goods delivered. She stated that, absent payment by letter of credit or cash, the manufacturer would have its own cash flow problems because it is required to pay for the materials, labor, and other factors to make the Games. (10 Tr.2d 1109:1-25 (Joy Lee).) 211. The Agreement set forth a pricing structure pursuant to which Paliafito was to purchase Games from MAI, (DX 11A, ¶ 3.1), which was not to be changed during the first twenty-four months. (DX 11A, ¶ 3.2.) 212. Paliafito was required to order goods in minimum lots of 10,000 units, (DX 11A, ¶ 4.4), and give MAI sixty days written notice for orders to be delivered by sea and thirty days by air. (DX 11A, ¶ 10.2.) For orders in excess of 10,000 units, Paliafito was required to give MAI ninety days written notice if by sea and sixty days if by air. (DX 11A, ¶ 10.3.) The notice was important to MAI because it takes time to- manufacture the Games and, with additional planning, MAI could get lower prices for materials and labor. (10 Tr.2d 1117:20 — 1118:24 (Joy Lee).) 213. Paliafito was also required to work with MAPs prior regional distributors “to the extent reasonable and possible.” (DX 11A, ¶ 13.3.) Joy Lee testified that this was also very important to MAI because of the existing business ongoing by the prior distributors and the knowledge of the Game held by the prior distributors. (11 Tr.2d 1132:3— 1133:2 (Joy Lee).) 214. MAI represented that it had all rights to the Patent. (DX 11A, ¶ 18.1.) MAI explicitly disclaimed, however, any representation dr warranty that the Patent was valid. (DX 11 A, ¶ 20.2.) 215. Paliafito was required to expend $00.70 per Game on advertising, (DX 11A, ¶ 12.2), to “cooperate and consult” with MAI in all advertising and to give MAI the right to approve all such advertising. (DX 11 A, ¶ 12.3.) 216. The Agreement was subject to MAI’s prior distribution agreement with Andes. (DX 11A, ¶ 18.4(a).) 217. The Agreement also provides for the payment by Paliafito to MAI of $1,000,000, for the rights, payments for which were to be made in four installments, the first due on signing, the second on March 1, 1991, the third on May 1, 1991 and the final payment on July 1, 1991. ' (DX 11A, ¶ 2.) 218. Upon termination of the Agreement, Paliafito had the option to continue to sell Games on a non-exclusive basis. (DX 11 A, ¶ 17.5.) 219. At the time she signed the Agreement, Joy Lee knew that Keith Andes was not involved in the Agreement. (4 Tr.2d 359-60:25, 1-11 (Joy Lee).) 220. Mantae made the following representations in the Agreement: (1) that MAI was a California corporation; (2) that Joy Lee was the inventor of the Game; and (3) that MAI had the exclusive right to market, sell and distribute the Game in the United States and desired to grant to Paliafito the exclusive right to market, sell and distribute the Game, subject to the rights of the existing distributors. (DX 11A at 1, ¶¶ 1, 2, 5, 6.) 221. Mark Paliafito testified that these representations were significant to Paliafito. (1 Tr. 148-49:7-25, 1-4 (Paliafito).) Andes testified, however, that no one from Paliafito cared about due diligence matters. (6 Tr.2d 527:15-24.) 222. Although the Agreement stated that Mantae was a California corporation, (DX 11A, at 1, ¶ 1), Mantae is, in fact, a New York corporation. (DX 12.) 223. Section 1.1 of the Agreement states that “[Mantae] hereby grants to WAAC the exclusive and complete marketing and distribution rights in the United S[t]ates and U.S. Territories, to [GRIP BALL];” Mantae also represented in the Agreement that it would not “enter into any agreement with any entity to distribute [the Game] in the U.S. or its Territories.” (DX 11A § 1.1, 18.6.) 224. Mark Paliafito testified that these representations were especially important to Paliafito. (1 Tr. 148-50:20-25, 1-25, 1-6 (Paliafito).) 225. The Agreement also contains an integration clause. Under this clause, the parties agreed that the Agreement “set forth the entire agreement and understandings between the parties ... and supercede[d] and merge[d] all prior discussions, agreements and/or writings between them.” (DX 11A § 20.3.) 226. On the same day that the parties executed the Agreement, Keith Nowak sent a letter to Hasbro without Paliafito’s knowledge or consent, offering for sale the exclusive rights to the Game for the mass market in the United States and other countries, including Canada, Australia, New Zealand, and the countries of South America. (DX 276.) Joy Lee testified, however, that she told Paliafito she was still dealing with Hasbro. (11 Tr.2d:8-110.) 227. Joy Lee testified that the letter to Hasbro was sent in the morning and the Agreement with Paliafito was signed in the afternoon. (11 Tr.2d 1183:7 — 1187:5 (Joy Lee).) Joy Lee testified that MAI kept Paliafito fully informed as to the Hasbro matter. (11 Tr.2d 1187:7 — 1188:5 (Joy Lee); MAI EX 4, DX 277.) 228. Joy Lee testified that the lack of Paliafito financing caused MAI to bring in Games on a D/A basis, instead of on an LC basis, which was a huge risk for MAI since if the Games were not paid for by MAI, the Korean manufacturer would lose its export license. Joy Lee also stated that lack of financing caused great disruption in the Korean manufacturer’s planning. (10 Tr.2d 1117:20 — 1118:24 (Joy Lee); 10 Tr.2d 1053:15 — 1054:21 (Joy Lee).) Paliafito notes, however, that between July 12, 1991 and October 18, 1991, it paid Mantae $4,137,649 for Games shipped. (DX 415, DX 415A.) 229. According to Karl Carlson, Senior Toy Buyer for Target stores, Paliafito was inexperienced in the toy business. (8 Tr.2d 776:22 — 780:22; 823:17 — 824:7 (Carlson).) G. SECTION TWO: PAYMENT FOR RIGHTS 230. Section Two of the Agreement required Paliafito to pay to Mantae $1,000,000 for the exclusive distribution rights. (DX 11A § 2.) 231. On February 15, 1991, Paliafito made the first $250,000 installment payment for the rights. (DX 15; 1 Tr. 163:9-19 (Paliafito).) 232. On March 1,1991, Paliafito made the second $250,000 installment payment. (DX 16; 1 Tr. 164:7-17 (Paliafito).) 233. On June 26,1991, Paliafito made the third $250,000 installment payment. (DX 17; 1 Tr. 164-65:24-25,1 (Paliafito); 2 Tr. 325:2-6 (Paliafito).) 234. Mark Paliafito testified that Joy Lee told him the third installment payment, initially due on May 1,1991, could be delayed to allow Paliafito to pay for unordered product that was arriving and she preferred Paliafito to pay for inventory rather than making the rights payment. (2 Tr. 325, 413-14:2-14, 21-25, 1-4 (Paliafito).) 235. Joy Lee testified she made some complaints to Paliafito regarding late payment. '(11 Tr.2d 1113:25 — 1114:4 (Lee); 2 Tr. 327:16-20 (Paliafito).) On April 29, 1991, Joy Lee requested Paliafito to forward payment of $250,000. (DX 136.) 236. On April 29, 1991, Joy Lee asked Paliafito to send its May 1st rights payment as soon as possible. The money was needed in Korea to keep things running smoothly, because Jerrold Lee had made promises based upon the terms of payment set out in the Agreement. This reason may or may not have been told to Paliafito. Joy Lee was told by Jerrold Lee that MAI, Ltd.’s bank in Korea asked that the check be made out to Jerrold personally. (DX 136; 11 Tr.2d 1211:5-11; 1212:7-23; 1213:8-13 (Joy Lee); see MAI’s Opposition to Paliafito’s Request For Determination of Foreign Law.) 237. On July 8 or 9, 1991, Paliafito delivered the final rights payment to Mantae. (1 Tr. 165-67:8-25, 1-25, 1-9 (Paliafito).) 238. Mark Paliafito testified that the three cheeks dated July 11, 1991 and constituting the final payment (check numbers 1377, 1378, and 1379), (DX 18), were deposited in Mantae’s account at the Hanmi Bank on July 10th, and posted to Paliafito’s bank account on July 11th, one day before Paliafito received a letter of termination from Mantae. (1 Tr. 166:20-25 (Paliafito); DX 18; DX 86, at 3 (bank statement at 2, column 1).) Joy Lee told her company to treat any money coming in from Paliafito as payment on accounts receivable, not rights under the contract. (12 Tr.2d 1312:4-19 (Joy Lee).) The checks contained in DX 18 do not indicate on their face that they were in final payment for rights under the contract. (DX 18 (compare MAI EX 46 (bounced check for final payment on rights)).) 239. Mantae’s financial officer, Bert Levesque, treated these three checks