Graminex, L. L.C. v. Cernelle

• Decision Date: 31 March 2020
• Docket Number: Case Number 18-13727
• Citation: 451 F.Supp.3d 732
• Parties: GRAMINEX, L.L.C., Plaintiff, v. AKTIEBOLAGET CERNELLE, aka A.B. Cernelle Company, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

451 F.Supp.3d 732

GRAMINEX, L.L.C., Plaintiff,

v.AKTIEBOLAGET CERNELLE, aka A.B. Cernelle Company, Defendant.

Case Number 18-13727

United States District Court, E.D. Michigan, Southern Division.

Signed March 31, 2020

Daniel D. Quick, Dickinson Wright, Troy, MI, Jessica Vartanian Currie, United States Attorney's Office, Detroit, MI, Melissa A. Alcantara, Dickinson Wright PLLC, Washington, DC, David Lee Petitjean, Groth & Associates, Toledo, OH, for Plaintiff.

Brandon M. Pellegrino, Matthew G. Berard, Bowman and Brooke, Bloomfield Hills, MI, Calli Jo Padilla, Robert W. Hayes, Cozen O'Connor, Philadelphia, PA, for Defendant.

OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND DISMISSING CASE WITHOUT PREJUDICE

DAVID M. LAWSON, United States District Judge

Before the Court is the defendant's motion to dismiss this declaratory judgment action for lack of subject matter jurisdiction. Plaintiff Graminex, L.L.C. seeks a declaration that it has not infringed trademarks belonging to defendant A.B. Cernelle Company, that Cernelle abandoned certain trademarks, and that Cernelle procured renewal of its trademark registrations by making fraudulent statements to the United States Patent and Trademark Office. Cernelle argues that Graminex lacks standing to pursue these claims, and that Graminex failed to meet the heightened pleading standard required for fraud allegations. Graminex lacks standing to pursue claims for declarations of noninfringement and abandonment of the marks. It also lacks standing to pursue its claims for cancellation of the trademarks. In both instances, Graminex has not alleged an actual or imminent injury that is concrete and particularized. Therefore, the Court will grant the motion to dismiss and dismiss the case.

I.

This lawsuit represents another chapter in the long-running dispute between two companies that produce flower-pollen-based nutraceutical products intended to promote prostate health. Cernelle is a company based in Sweden. For over fifty years, it has produced dietary supplements (nutraceuticals), including its brands CERNITIN and CERNILTON. The Food and Drug Administration (FDA) had verified Cernelle's claims made in connection with its products and Cernelle obtained approval for its products in Europe.

Graminex is based in Michigan. Over a dozen years ago, it was a source of raw, threshed flower pollen for Cernelle and distributed Cernelle's products in the United States. Their relationship deteriorated when Cernelle accused Graminex and its chief operating officer, Cynthia May, of attempting to appropriate its trademarks, prompting a lawsuit in this Court in 2003. The Court issued a preliminary injunction that prohibited the defendants from alienating Cernelle's trademarks and dealing in products using those marks. That case was settled in 2006, and the parties signed a detailed settlement agreement. Graminex confirmed Cernelle's ownership of the marks and Graminex was prohibited from using them. The settlement order also included a permanent injunction. The injunction, among other things, restricted Graminex's use of Cernelle's registered trademarks CERNILTON and CERNITIN.

Following the settlement, Graminex alleges, Cernelle stopped using the CERNILTON and CERNITIN registered marks (and others) in the United States. It also stopped selling products branded with those marks directly to wholesalers, retailers, and end users in the United States, and stopped selling nutritional supplements

.

In 2018, Cernelle came upon information that convinced it that Graminex was violating the settlement agreement and the permanent injunction. It sent three cease-and-desist letters. Graminex's responses prompted Cernelle to file a motion to enforce the settlement agreement and hold Graminex in contempt for violating the injunction. While that motion was pending, Graminex filed the present lawsuit seeking declaratory relief. Graminex says that it believes Cernelle will pursue an infringement action against it for the same purported use of the CERNILTON and CERNITIN marks alleged in the contempt motion in the other case. It preemptively seeks a declaration of its rights. Graminex also requests that the Court cancel Cernelle's registrations as to eight of its trademarks based on Cernelle's alleged fraudulent maintenance of registrations over the years.

Graminex also alleges that, despite Cernelle's non-use of its marks, between 2010 and 2016 Cernelle's counsel, acting with Cernelle's knowledge and approval, filed false statements and specimens with the United States Patent and Trademark Office (USPTO) to maintain and renew federal trademark registrations for the following marks:

• CERNITIN, Registration No. 2,529,008;

• CERNILTON, Registration No. 3,038,705;

• POLLEN STARK, Registration No. 2,519,275;

• CERNI-QUEEN, Registration No. 2,447,819;

• NAPOLEON GOLD, Registration No. 2,661, 290;

• POLLISPORT, Registration No. 2,519,274;

• CERNELLE, Registration No. 0822267; and

• POLLISTABS Sport, Registration No. 2,495,583.

As to all those marks, Cernelle's counsel filed a "Combined Declaration of Use/Application for Renewal of Registration of a Mark under Sections 8 & 9," accompanied by a specimen of use that did not show then-current use of Cernelle's trademark in United States commerce. Instead, the specimens actually showed Graminex's products as offered or formerly offered for sale by unrelated third parties in secondary markets over which Cernelle had no control. The application was executed by Cernelle's attorney who declared, under oath, that the marks were in use in commerce.

On September 8, 2017, Graminex and its legal counsel received the first of the three cease-and-desist letters from Cernelle's counsel. The letter accused Graminex of repeatedly violating the terms of the permanent injunction and breaching the settlement agreement by actively selling products that contain Cernelle's trademarks in both the United States and around the world, and by displaying on Graminex's website clinical studies on Cernelle's products. The letter summarized the events surrounding the earlier litigation, including that Cernelle previously sought to restrain Graminex from "infringing Cernelle's registered trademarks." Cernelle also accused Graminex of unlawfully registering the CERNILTON mark in other jurisdictions. The letter noted that "Graminex has resumed the very conduct that Cernelle challenged in the litigation, [which] the Court determined to be unlawful[,] and that Graminex agreed and was ordered to cease and desist. The conduct is also independently wrongful under the laws of numerous countries, is misleading and actionable."

When Cernelle's counsel received Graminex's apparently unsatisfying response, he sent another cease and desist letter to Graminex on October 17, 2017. The second correspondence indicated that Cernelle "remains committed to pursuing all available legal remedies for the continued violations of the Injunctions and Settlement Agreement." Counsel wrote:

Plainly, if Graminex were not attempting to trade upon the world-wide reputation of Cernelle's products, it would have no need to continually reference them.

As set forth in...prior correspondence, without waiving any of its rights, Cernelle again demands that Graminex cease and desist all action that is in direct violation of the Injunctions and in material breach of the Settlement Agreement. Should Graminex refuse to provide the additional information requested and cease all unlawful conduct as outlined herein, Cernelle will have no choice but to pursue all available legal remedies to rectify Graminex's violations.

ECF No. 1-2, PageID.36.

On July 19, 2018, Cernelle's counsel sent a third letter to Graminex informing it of Cernelle's intention to file a motion for contempt, which was enclosed. The letter indicated that Cernelle had "developed substantial evidence of [Graminex's] involvement with the foreign entities utilizing Cernelle's trademarks," and that Cernelle had "established Graminex's violations of the permanent injunction and settlement agreement in the United States." Cernelle filed the motion for contempt on August 24, 2018. See Case No. 03-10291, ECF No. 89.

Graminex alleges here that "the threats and allegations made by Cernelle's counsel, which go beyond the motion currently pending in Civil Action No. 2:03-cv-10291-DML, have created an actual, substantial, and continuing controversy between Cernelle and Graminex concerning the right of Graminex to supply, sell, offer to sell, and distribute nutraceuticals and nutritional supplements

to its customers abroad." Compl. ¶ 14.

On November 30, 2018, Graminex filed its complaint under the Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a declaration that "Graminex's supply, sale, offering for sale, advertising and distribution of nutraceuticals and nutritional supplements

do not infringe any proprietary rights owned by Cernelle and do not result in any acts of unfair competition with Cernelle" (Count I) and that Cernelle has abandoned the CERNILTON and CERNITIN trademarks based on non-use of the marks (Count II). The complaint also requests that the Court order the cancellation of the registration for the marks

CERNITIN, CERNILTON, POLLEN STARK, CERNI-QUEEN, NAPOLEON GOLD, POLLISPORT, CERNELLE, and POLLITABS SPORT under 15 U.S.C. § 1119 (Counts III-X).

In responding to the complaint with its motion to dismiss, Cernelle argues that (1) there is no "actual controversy" between the parties beyond the contempt proceeding that furnishes a basis for jurisdiction under the Declaratory Judgment Act; (2) even if there were, the Court should decline to exercise jurisdiction over the mater; (3) Graminex lacks standing to challenge the registrations for CERNILTON and CERNITIN; and (4) the fraud counts must be dismissed because they were not pleaded with particularity.

II.

Cernelle brings its motion to dismiss under both Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). Rule 12(b)(1) authorizes the...