Natural Alternatives Int'l, Inc. v. Allmax Nutrition, Inc.

• Decision Date: 26 June 2017
• Docket Number: Case No.: 16-cv-01764-H-AGS.
• Citation: 258 F.Supp.3d 1170
• Parties: NATURAL ALTERNATIVES INTERNATIONAL, INC., Plaintiff, v. ALLMAX NUTRITION, INC. ; HBS International Corp.; and Does 1–100, Defendants.
• Court: U.S. District Court — Southern District of California

258 F.Supp.3d 1170

NATURAL ALTERNATIVES INTERNATIONAL, INC., Plaintiff,

v.ALLMAX NUTRITION, INC. ; HBS International Corp.; and Does 1–100, Defendants.

Case No.: 16-cv-01764-H-AGS.

United States District Court, S.D. California.

Signed June 26, 2017

Caroline C. Maxwell, Porzio, Bromberg and Newman, PC, Wahington, DC, Frederick William Kosmo, Jr., Hubert Kim, Wilson Petty Kosmo and Turner, San Diego, CA, Kevin M. Bell, Richard J. Oparil, Scott A.M. Chambers, William John McKeague, Porzio Bromberg & Newman, P.C., Washington, DC, for Plaintiff.

Ragesh K. Tangri, Michael Aaron Feldman, Sonal N. Mehta, Durie Tangri LLP, San Francisco, CA, for Defendants.

ORDER:

(1) GRANTING DEFENDANT ALLMAX'S MOTION FOR JUDGMENT ON THE PLEADINGS AND DEFENDANT HBS'S MOTION TO DISMISS WITH PARTIAL LEAVE TO AMEND; AND

(2) DENYING PLAINTIFF'S MOTION FOR JUDGMENT ON THE PLEADINGS

MARILYN L. HUFF, District Judge

On April 25, 2017, Defendant Allmax Nutrition, Inc. filed a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), and Defendant HBS International Corp. filed a motion to dismiss Plaintiff Natural Alternatives International, Inc.'s first amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. Nos. 43, 44.) On May 19, 2017, Plaintiff filed an opposition to Defendants' motions. (Doc. No. 56.) On June 2, 2017, Defendants filed a reply. (Doc. No. 59.)

On May 22, 2017, Plaintiff NAI filed a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). (Doc. No. 57.) On June 12, 2017, Defendants filed an opposition to Plaintiff's motion. (Doc. No. 61.) On June 19, 2017, Plaintiff filed its reply. (Doc. No. 62.)

The Court held a hearing on the matters on June 26, 2017. Richard J. Oparil, William J. McKeague, and Frederick W. Kosmo appeared for Plaintiff NAI. Ragesh K. Tangri appeared for Defendants Allmax and HBS. For the reasons below, the Court denies Plaintiff's Rule 12(c) motion, and the Court grants Defendants' Rule 12 motions with partial leave to amend.

Background

The following facts are taken from the allegations in Plaintiff's first amended complaint. Plaintiff NAI is a formulator, manufacturer, marketer, and supplier of nutritional supplements

. (Doc. No. 11, FAC ¶ 11.) Plaintiff sells its branded CarnoSyn® beta-alanine product to customers throughout the United States and in other countries. (Id.¶ 1.) Plaintiff alleges that its CarnoSyn® product is covered by a robust portfolio of trademark, copyright, and patent rights. (Id. )

Plaintiff alleges that Defendants Allmax and HBS International Corp. offer to sell and sell dietary supplements containing beta-alanine in the United States, including through retailers located in California. (Id.¶¶ 1, 8–9, 27–31.) Plaintiff further alleges that Defendants' website utilizes Plaintiff's trademarks and copyrights in the marketing of Defendants' beta-alanine products. (Id.¶¶ 31–55.) Plaintiff alleges that these acts constitute trademark, copyright, and patent infringement. (Id.¶¶ 77–95.)

On July 8, 2016, Plaintiff filed a complaint against Defendant Allmax, alleging claims for: (1) violation of the Lanham Act § 32; (2) copyright infringement; and (3) patent infringement. (Doc. No 1.) On October 13, 2016, Defendant Allmax filed a motion to dismiss Plaintiff's complaint for lack of personal jurisdiction. (Doc. No. 9.) In response to Allmax's motion to dismiss, on October 19, 2016, Plaintiff filed a first amended complaint adding HBS as an additional defendant and alleging the same causes of action as in the original complaint and adding a claim for civil conspiracy. (Doc. No. 11.) In light of Plaintiff's first amended complaint, on October 20, 2016, the Court denied Defendant Allmax's motion to dismiss Plaintiff's original complaint as moot. (Doc. No. 13.)

On November 16, 2017, Defendant Allmax filed a motion to dismiss Plaintiff's first amended complaint for lack of personal jurisdiction. (Doc. No. 18.) On February 21, 2017, the Court denied Allmax's motion to dismiss for lack of personal jurisdiction. (Doc. No. 32.) On March 14, 2017, Defendant Allmax filed counterclaims and an answer to Plaintiff's first amended complaint. (Doc. No. 33.)

By the present motions, Defendant Allmax moves for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) and Defendant HBS moves for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6) as to Plaintiff's claims for violation of Lanham Act § 32, patent infringement, and civil conspiracy.¹(Doc. Nos. 43–1 at 1, 44–1 at 1.) In addition, Plaintiff moves for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) as to Defendant Allmax's fourth affirmative defense and second counterclaim raising invalidity of the patents-in-suit. (Doc. No. 57–1 at 2.)

Discussion

I. Legal Standards for a Rule 12(b)(6) Motion to Dismiss and a Rule 12(c) Motion for Judgment on the Pleadings

In patent cases, a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) and a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) are both governed by the applicable law of the regional circuit. K–Tech Telecommunications, Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1282 (Fed. Cir. 2013) ; Amdocs (Israel) Ltd. v. Openet Telecom, Inc., 841 F.3d 1288, 1293 (Fed. Cir. 2016). Federal Rule of Civil Procedure 8(a)(2) requires that a pleading stating a claim for relief containing "a short and plain statement of the claim showing that the pleader is entitled to relief." The function of this pleading requirement is to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the pleadings and allows a court to dismiss a complaint if the plaintiff has failed to state a claim upon which relief can be granted. See Conservation Force v. Salazar, 646 F.3d 1240, 1241 (9th Cir. 2011).

Federal Rule of Civil Procedure 12(c) provides"[a]fter the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." The Ninth Circuit has explained that the standard for deciding a Rule 12(c) motion "is ‘functionally identical’ " to the standard for deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 n.4 (9th Cir. 2011) (quoting Dworkin v. Hustler Magazine Inc., 867 F.2d 1188, 1192 (9th Cir. 1989) ); accord Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012).

A complaint will survive a Rule 12(b)(6) motion to dismiss if it contains "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.’ " Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ). "Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’ " Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955 ). Accordingly, dismissal for failure to state a claim is proper where the claim "lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008).

In reviewing a Rule 12(b)(6) motion to dismiss, a district court must accept as true all facts alleged in the complaint, and draw all reasonable inferences in favor of the plaintiff. See Retail Prop. Trust v. United Bhd. of Carpenters & Joiners of Am., 768 F.3d 938, 945 (9th Cir. 2014). But, a court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Further, it is improper for a court to assume the plaintiff "can prove facts which it has not alleged or that the defendants have violated the ... laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983).

II. Plaintiff's Rule 12(c) Motion for Judgment on the Pleadings²

In its answer, Defendant Allmax alleges as its fourth affirmative defense and second counterclaim that each and every asserted claim from the patents-in-suit is invalid. (Doc. No. 33 at 31, 35.) Plaintiff moves for judgment on the pleadings as to Allmax's invalidity affirmative defense and counterclaim. (Doc. No. 57–1 at 2.) Specifically, Plaintiff argues that Allmax may not assert this affirmative defense and counterclaim because the Defendants are parties to two license agreements with Plaintiff that contain provisions prohibiting Defendants from contesting the validity of Plaintiff's patents. (Id. at 4–5.) In response, Defendants argue that the no-contest provisions contained in the license agreements are void as against public policy. (Doc. No. 61 at 3–6.) In reply, Plaintiff argues that the no-contest provisions are valid and enforceable. (Doc. No. 62 at 2–7.)

The parties agree that they have entered into two license agreements, one in 2014 and one in 2016.³ (Doc. No. 57–1 at 2; Doc. No. 61 at 2; see Doc. No. 57–3, Oparil Decl. Ex. A.) The 2014 agreement contains a provision stating: "[Defendants] will not contest or aid others in contesting the validity, enforceability or NAI's ownership of and/or rights in the Patent Rights and Trademark Rights."⁴ (Doc. No. 57–3, Oparil Decl. Ex. A at Ex. 1 ¶ 6.) The 2016 agreement similarly contains a provision...