United States District Court, D. Arizona
ORDER
H.
RUSSEL HOLLAND UNITED STATES DISTRICT JUDGE.
Motion
to Dismiss
Defendant
moves to dismiss plaintiff's first amended
complaint.[1] This motion is opposed.[2] Oral argument was
requested and has been heard.
Background
Plaintiff
is ThermoLife International, LLC. Defendant is NeoGenis Labs,
Inc. d/b/a Human N.
Plaintiff
alleges that it was founded in 1998 by Ron Kramer and that it
“is a world leader in the use and development of
nitrate technology.”[3] Plaintiff alleges that it “holds
23 separate and distinct patents that protect its innovative
development and use of ingredients in dietary supplements and
food products.”[4] Plaintiff alleges that it also
“holds several patents related to the use of amino
acids in combination with nitrates to increase
performance” and that it is “the exclusive
licensee of U.S. Patent No. 9, 180, 140 (‘the
‘140 Patent'), titled ‘Performance enhancing
composition and use thereof.”[5] Plaintiff alleges that it
“licenses the use of its patented technology . . . to
many of the largest dietary supplement companies in the USA,
including JYM Supplement Science.”[6] Plaintiff also
alleges that it “supplies the raw materials necessary
to practice its patented inventions” and that raw
materials supplied by it “are included in some of the
top-selling dietary supplements, including Cellucor's C4
and NO3 Ultimate, Purus Labs' Noxygen, Evlution
Nutrition's PumpMode, Build Fast Formula's Vasoblitz,
Ghost Pump by Ghost, and PEScience's High
Volume.”[7]
Defendant
“sells nitric oxide test strips and dietary
supplements[, ]” including SuperBeets, BeetElite and
Neo40.[8] Plaintiff alleges that defendant was
“formed in 2009” and that “Joel Kocher, Dr.
Nathan Bryan, [and] Janet Zand are all co-founders of”
defendant.[9] Plaintiff alleges that [t]he majority of
[defendant's] products rely on beets to provide consumers
nitrates” and that defendant “is a dominant force
in the beet supplementation market.”[10]
Plaintiff
alleges that defendant's products compete with products
that use plaintiff's raw materials and products that are
produced using plaintiff's patented nitrate
technology.[11] Although plaintiff does not currently
market oxide testing strips, plaintiff alleges that in
October 2018, it began “working with Shawn Green”
to “develop a consumer product test strip to support
the use of products that include” plaintiff's
“patented technologies.”[12]Plaintiff alleges that
“[w]hile the business deal is not finalized, when the
deal is reached, ” it “will be in . . . direct
competition” with defendant's “Nitric Oxide
Test Strip[.]”[13]
Plaintiff
alleges that defendant is falsely claiming “that it has
developed a ‘patent pending' method to determine
‘if you are N-O [nitric-oxide] deficient' and/or
‘if you're getting enough dietary nitrate through
the foods that you eat': HumanN's nitric oxide
Indicator Strips.”[14] Plaintiff alleges that this claim is
false because “[i]n fact, on August 13, 2013,
HumanN's Dr. Nathan Bryan applied for a patent for a
‘method of determining the level of nitric oxide (NO)
or nitrite (NO2-)” but “[t]he United States
Patent Office rejected all 35 proposed patent
claims.”[15]
Plaintiff
also alleges that defendant is falsely claiming that the N-O
Indicator Strips “can determine whether an individual
is nitric oxide deficient[.]”[16] Plaintiff alleges,
however, that “it is well-settled that you cannot
determine whether an individual is ‘deficient in N-O
[nitric oxide]' and/or ‘getting sufficient
nitric-oxide activating nutrients through [their] diet'
simply by testing their saliva one time.”[17] Plaintiff
alleges that a 2015 study (the Clodfelter study) tested
defendant's N-O Indicator Strips, along with other
similar products, and concluded that “‘[t]here is
no correlation between plasma NO2- and salivary NO3- . . . .
Our results argue against the use of salivary NO2- as a
marker for NO bioavailability.'”[18]
Plaintiff
next alleges that defendant is falsely claiming “that
[its] top-selling BeetElite, SuperBeets, and Neo40 products
practice six patents that HumanN exclusively licenses from
the University of Texas[.]”[19] Plaintiff alleges that
defendant formerly “list[ed] six patent numbers”
on the labels of these products but that in mid-2017,
defendant “removed [three] patent numbers from these
products' labels that the products clearly never
practiced[.]”[20]Plaintiff alleges, however, that
“[defendant's] website, Amazon.com, and countless
other websites on the internet where consumers go to actually
purchase the product, still mislead consumers by showing all
six patent numbers.”[21]
As for
the three patents still listed on the SuperBeets and
BeetElite labels, the ‘589, ‘570, and ‘999
patents, plaintiff alleges that BeetElite and SuperBeets
“do not practice” any of these
patents.[22] Plaintiff alleges that all three patents
“require a ‘nitrite salt' to practice the
patented inventions” but that defendant “is well
aware that its SuperBeets and BeetElite products do not
contain a nitrite salt[.]”[23]
Plaintiff
further alleges that
even if the nitrites in the BeetElite and SuperBeets products
could be considered ‘nitrite salts' (which they
cannot), the products would still also be falsely marked,
falsely advertised, misbranded, and prohibited for sale in
interstate commerce because they are under-dosed (i.e., they
fail to include sufficient quantity of nitrites of any sort
to practice the patented inven-tions).[24]
Plaintiff
alleges that it did laboratory testing on the BeetElite and
SuperBeets products in 2016 and 2018 and that both tests
showed that the products contained an insufficient amount of
nitrites to practice the ‘589 and ‘570
patents.[25]
Plaintiff
also alleges that defendant is falsely claiming that its
“licensed patents protect ‘patented Nitric Oxide
technology'[.]”[26] Plaintiff alleges that
[o]f the six patents that [defendant] has licensed from the
University of Texas, . . . three are merely composition
patents that protect a mixture of certain nitrites and
nitrates and the other three patents protect methods of
administering compositions; however, none of the patents
include a claim for producing nitric oxide. In fact, not one
of the 75 claims included in the six patents falsely marked
on [defendant's] products even include the phrase
“nitric oxide” in any claim.[27]
Plaintiff
next alleges that defendant is falsely claiming “that
HumanN's research is ‘Nobel-Prize
winning'[.]”[28] Plaintiff alleges that defendant had
nothing to do with the 1998 Nobel Prize to which it refers
and that defendant “falsely advertises itself as a
Nobel Prize winner in order to falsely convey to consumers
that its owns a monopoly on ‘patented nitric oxide
technology.'”[29]
Plaintiff
next alleges that defendant is falsely claiming that it
“is the only company that can practice ‘patented
N-O platform technology.'”[30] Plaintiff alleges that
there are other products “that rely on nitric oxide
technology, ” including products that use creatine
nitrate, which is supplied by plaintiff and “included
in many of the top-selling dietary supplements in the
world.”[31]
Finally,
plaintiff alleges that defendant is falsely claiming that its
products are Foods or Dietary Supplements.[32]
Plaintiff
commenced this action on September 20, 2018. In its original
complaint plaintiff asserted false marking claims pursuant to
35 U.S.C. § 292, Lanham Act false advertising claims,
and common law unfair competition claims. Plaintiff's
complaint was dismissed for lack of standing because
plaintiff failed to adequately allege a competitive or
commercial injury. Plaintiff was given leave to amend its
complaint, and on April 26, 2019, plaintiff filed its first
amended complaint. Plaintiff again asserts false marking
claims pursuant to 35 U.S.C. § 292, Lanham Act false
advertising claims, and common law unfair competition claims.
For relief, plaintiff seeks “an accounting for the past
five years of all gains, profits, and advantages derived by
[d]efendant's false marking of the BeetElite, SuperBeets,
Neo40, and N-O Indicator Strips products[, ]” damages,
a disgorgement of profits, treble damages under 15 U.S.C.
§§ 1117 and 1125(a), pre- and post-judgment
interest, and “such other and further relief as this
[c]ourt may deem just and proper.”[33]
Pursuant
to Rule 12(b)(6), Federal Rules of Civil Procedure, defendant
now moves to dismiss plaintiff's first amended complaint.
Discussion
“‘To
survive a [Rule 12(b)(6)] motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to state
a claim to relief that is plausible on its face.'”
Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir.
2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). “A claim is facially plausible ‘when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.'” Id. (quoting
Iqbal, 556 U.S. at 678). “The plausibility
standard requires more than the sheer possibility or
conceivability that a defendant has acted unlawfully.”
Id. “‘Where a complaint pleads facts
that are merely consistent with a defendant's liability,
it stops short of the line between possibility and
plausibility of entitlement to relief.'”
Id. (quoting Iqbal, 556 U.S. at 678).
“[T]he complaint must provide ‘more than labels
and conclusions, and a formulaic recitation of the elements
of a cause of action will not do.'” In re Rigel
Pharmaceuticals, Inc. Securities Litig., 697 F.3d 869,
875 (9th Cir. 2012) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007)). “In evaluating
a Rule 12(b)(6) motion, the court accepts the complaint's
well-pleaded factual allegations as true and draws all
reasonable inferences in the light most favorable to the
plaintiff.” Adams v. U.S. Forest Srvc., 671
F.3d 1138, 1142-43 (9th Cir. 2012). “However, the trial
court does not have to accept as true conclusory allegations
in a complaint or legal claims asserted in the form of
factual allegations.” In re Tracht Gut, LLC,
836 F.3d 1146, 1150 (9th Cir. 2016).
First
Cause of Action - false marking claims
“Title
35 section 292(a) prohibits, in part, ‘mark[ing] upon .
. . in connection with any unpatented article, the word
‘patent' or any word or number importing that the
same is patented, for the purpose of deceiving the
public.'” Sukumar v. Nautilus, Inc., 785
F.3d 1396, 1399 (Fed. Cir. 2015) (quoting 35 U.S.C. §
292(a)). “Section 292(b) provides a private right of
action to enforce § 292(a) to any ‘person who has
suffered a competitive injury as a result of a violation of
this section.'” Id. (quoting 35 U.S.C.
§ 292(b)).
Defendant
first argues that plaintiff lacks standing to bring a false
marking claim in connection with the N-O Indicator Strips
because plaintiff has still not alleged that it suffered a
competitive injury as a result of defendant's alleged
false marking of this product. A “competitive
injury” has been defined as “‘[a] wrongful
economic loss caused by a commercial rival, such as the loss
of sales due to unfair competition[.]'”
Id. at 1400 (quoting Black's Law
Dictionary (9th ed. 2009)). However, “§
292(b) extends standing to sue for a violation of §
292(a) to some potential competitors.” Id.
“[A] potential competitor is engaged in competition if
it has attempted to enter the market, which includes intent
to enter the market and action to enter the market.”
Id.
In its
amended complaint, plaintiff alleges that it is attempting to
enter the nitric-oxide test strip market. Plaintiff alleges
that “[s]ince at least October 2018, [it] has been
working with Shawn Green on this project. Mr. Green is the
former owner of Berkeley Test, LLC, which holds U.S. Patents
Nos. 9, 759, 716 and 9, 360, 490. . . . Both patents relate
to methods for testing and monitoring biomarkers of nitric
oxide.”[34] Plaintiff further alleges that
“Mr. Green is currently working on a next generation
saliva test strip[] to monitor salivary nitrite levels in
relation to blood pressure and . . . strips that measure NO
probiotic in saliva.”[35]Plaintiff alleges that it has
had “several face-to-face meeting[s] and numerous phone
conferences” to discuss this project with Mr. Green and
that “when the deal is reached, [it] will be in . . .
direct competition with HumanN's Nitric Oxide Test
Strip[s].”[36]
“‘[S]tanding
is to be determined as of the commencement of
suit.'” United States v. Maricopa County,
151 F.Supp.3d 998, 1009 n.6 (D. Ariz. 2015) (quoting
Lujan v. Defenders of Wildlife, 504 U.S. 555, 570,
n.5 (1992)). Here, plaintiff alleges that it began working on
the test strip project in October 2018, which was after
plaintiff commenced this lawsuit in September 2018.
Plaintiff,
however, argues that “[t]he Court must measure standing
by the state of the world as of the date of the [a]mended
[c]omplaint.'” G & E Real Estate, Inc. v.
Avison Young-Wash., D.C., LLC, 168 F.Supp.3d 147, 159
(D.D.C. 2016). Plaintiff contends that the Ninth Circuit
adopted this rule in Northstar Financial Advisors Inc. v.
Schwab Investments, 779 F.3d 1036 (9th Cir. 2015).
But,
plaintiff is wrong. As the Ninth Circuit has noted,
Northstar did
not actually address whether standing is measured at the time
of an initial complaint or at the time of an amended
complaint, as opposed to whether the allegations in an
amended complaint may sometimes be considered in evaluating
whether there was standing at the time the case was
originally filed or whether an amended complaint may be
considered a supplemental pleading under Federal Rule of
Civil Procedure 15(d).
In re Zappos.com, Inc., 888 F.3d 1020, 1028 n.10
(9th Cir. 2018). The rule in the Ninth Circuit is that
“standing-where it would have been necessary to bring
the claim in the district court-cannot be created
retroactively. . . .” Western Watersheds Project v.
Kraayenbrink, 632 F.3d 472, 483 n.6 (9th Cir. 2011);
see also, Friends of the Earth, Inc. v. Laidlaw
Environmental Services (TOC), Inc., 528 U.S. 167, 180
(2000) (courts have “an obligation to assure
[themselves] that [a plaintiff] had Article III standing at
the outset of the litigation”). Plaintiff did not have
standing to bring its false marking claims with respect to
the N-O Indicator Strips “at the outset of th[is]
litigation[.]” Id. Thus, plaintiff's false
marking claims with respect to the N-O Indicator Strips are
dismissed. Plaintiff is not given leave to amend these claims
because it is unlikely that plaintiff could ever allege that
it had standing to bring these claims at the outset of this
litigation and because plaintiff has already had two
opportunities to adequately plead standing.
Defendant
next argues that plaintiff's false marking claims as to
SuperBeets, BeetElite, and Neo40 should be dismissed as
implausible. These claims consist of two groups. One group is
claims based on allegations that defendant is still showing
pictures of these products on the internet that list six
patents on the products' labels even though defendant
removed three of the patents from the actual product labels
in 2017 (the internet claims). The other group is claims
based on allegations that these products do not practice the
three patents which are still listed on the products'
actual labels (the under-dosed claims).
“‘The
two elements of a § 292 false marking claim are (1)
marking an unpatented article and (2) intent to deceive the
public.'” Juniper Networks, Inc. v.
Shipley, 643 F.3d 1346, 1350 (Fed. Cir. 2011) (quoting
Forest Grp. Inc. v. Bon Tool Co., 590 F.3d 1295,
1300 (Fed. Cir. 2009)). “Intent to deceive is a state
of mind arising when a party acts with sufficient knowledge
that what it is saying is not so and consequently that the
recipient of its saying will be misled into thinking that the
statement is true.” Clontech Laboratories, Inc. v.
Invitrogen Corp., 406 F.3d 1347, 1352 (Fed. Cir. 2005).
Defendant
argues that the first group of claims, the internet claims,
are not plausible for two reasons. First, defendant argues
that when a product carries both proper and false patent
markings, a plaintiff must show specifically that the falsely
marked patents caused it harm. This argument is based on
Sukumar, in which the court observed that “a
potential competitor must show that the falsely marked
patents deterred market entry, but that-for some reason-the
properly marked patents did not deter market entry.”
785 F.3d at 1402. Defendant contends that because it properly
marks its products with at least one patent (the ‘999
patent), plaintiff must plead sufficient facts to show that
it was somehow injured by the other patent markings, which,
according to defendant, plaintiff has not done.
“When
the [false marking] statute refers to an ‘unpatented
article' the statute means that the article in question
is not covered by at least one claim of each patent with
which the article is marked.” Clontech
Laboratories, 406 F.3d at 1352. In other words,
“courts must consider whether a product is falsely
marked with each patent.” DP Wagner Mfg. Inc. v.
Pro Patch Systems, Inc., 434 F.Supp.2d 445, 455 (S.D.
Tex. 2006). Even if SuperBeets, BeetElite, and Neo40 practice
the ‘999 patent, it is plausible that they do not
practice at least some of the other five patents and it is
plausible to infer that plaintiff has been injured as a
result of this false marking because a consumer might be more
likely to purchase a product that lists several patents as
opposed to a product that lists only one patent.
Defendant
also argues that the internet claims should be dismissed
because plaintiff has not adequately alleged intent.
Defendants argue that the removal of the three patents from
the product labels “militate against an intent to
deceive the public. . . .” Public Patent
Foundation, Inc. v. GlaxoSmithKline Consumer Healthcare,
L.P., 801 F.Supp.2d 249, 265 (S.D.N.Y. 2011). But given
that plaintiff has alleged that defendant still continues to
list all six patents on its products as they are advertised
on the internet, plaintiff has plausibly alleged intent.
As for
the second group of claims, the under-dosed claims, plaintiff
alleges that BeetElite and SuperBeets do not practice the
three patents because “[t]he ‘589 Patent,
‘570 Patent, and ‘999 Patent all require a
‘nitrite salt' to practice the patented inventions:
but SuperBeets and BeetElite . . . do not contain a nitrite
salt[.]”[37] Defendant argues that these claims are
not plausible because it has offered a Certificate of
Analysis, which the court took judicial notice of, which
shows that the ...