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Ivoclar Vivadent, Inc. v. North American Dental Wholesalers

August 23, 2006

IVOCLAR VIVADENT, INC., PLAINTIFF,
v.
NORTH AMERICAN DENTAL WHOLESALERS, INC. AND URI KALFA, DEFENDANTS.
NORTH AMERICAN DENTAL WHOLESALERS, INC., COUNTERCLAIMANT,
v.
IVOCLAR VIVADENT, INC, COUNTERDEFENDANT, AND IVOCLAR VIVADENT, A.G. AND PETERSON DENTAL SUPPLY, INC., ADDITIONAL COUNTERDEFENDANTS.



The opinion of the court was delivered by: John T. Elfvin S.U.S.D.J.

MEMORANDUM ORDER*fn1

INTRODUCTION AND BACKGROUND

Plaintiff Ivoclar Vivadent, Inc. ("Ivoclar") commenced this action and three others*fn2 on April 5, 2004 against defendants North American Dental & Wholesalers, Inc. ("North American") and Uri Kalfa ("Kalfa"), and the other defendants in these actions, alleging, inter alia, trademark infringement and dilution (15 U.S.C. §§1114 & 1125), unlawful importation (15 U.S.C. §1124 and 19 U.S.C. §1526), misappropriation and unfair competition with regard to certain of its registered and unregistered trademarked dental products. An amended complaint was filed July 27, 2004 (Dkt. #9) and on December 13, 2004 the defendants filed its answer*fn3 with counterclaims (Dkt. #14). On March 8, 2005 Ivoclar filed its reply to the counterclaims (Dkt. #20) and on September 23, 2005, also filed a motion pursuant to FRCvP 12(c) to dismiss those counterclaims (Dkt. #24), which is currently pending before the Court. Also pending are the defendants' motions for a protective order (Dkt. #29) and to compel (Dkt. #33) and Ivoclar's motions to compel (Dkt. #37) and for a stay (Dkt. #38).

The Amended Complaint alleges the following. Ivoclar is in the business of marketing, distributing and selling dental products nationally and internationally. North American is a Canadian corporation and Kalfa is a Canadian resident, both doing business in New York selling and distributing, among other things, dental products. Kalfa is a principal, officer, employee, agent and/or representative of North American and the individual actor in many of the wrongful acts alleged to have been committed by North American. Ivoclar has valid and inherently distinctive trademarks with regard to certain enumerated dental products and claims a carefully cultivated reputation for excellent product quality, customer service and reliability. The defendants unlawfully and willfully gained possession of some of Ivoclar's trademarked products (those enumerated in the complaint) and imported them into the United States. Kalfa actively authorized, approved and coordinated their sale and distribution here without the consent and authorization of Ivoclar. The defendants distributed and sold these products without the high quality advertising and marketing that Ivoclar demands, with insufficient inspection, quality control, labeling, packaging*fn4 or warranties, hence making them materially different from the products as sold and distributed by Ivoclar and its authorized distributors. As such, Ivoclar's customers were likely to be misled, confused or deceived as to the source of the products and the distinctive quality of Ivoclar's trademarks and the integrity of its business reputation were threatened. Ivoclar further alleges that the defendants refused to stop selling their products or identify their source of supply of such products when so requested by Ivoclar, and continue to engage in the alleged unlawful practices. The complaint seeks, inter alia, a permanent injunction, an accounting, constructive trust, treble damages, attorney's fees and costs.

The defendants' counterclaims seek (1) a judicial declaration under the Declaratory Judgment Act, 28 U.S.C. §2201 et seq. ("the DJA") that the defendants are not liable to Ivoclar under any of the claims asserted in the complaint and that Ivoclar and the additional named defendants, Ivoclar Vivadent, A.G.(Ivoclar's foreign parent corporation - hereinafter "IvoclarAG") and Peterson Dental Supply (an authorized Ivoclar distributor - hereinafter "Peterson")*fn5 are liable to the defendants for the remaining counterclaims contained therein["Count I"]; (2) judgment against the counterclaim defendants for violations of Section 1 of the Sherman Act (15 U.S.C. §1), the Wilson Tariff Act (15 U.S.C. §8) and the New York Donnelly Act (Article 22, section 340 of the New York General Business Law) ["Counts II, III and IV", respectively]; (3) judgment against the counterclaim defendants for tortious interference with prospective and advantageous business relations and civil conspiracy ["Counts V and VI", respectively]; and (4) cancellation of Ivoclar's trademark registrations pursuant to Section 37 of the Lanham Act (15 U.S.C. §1119) ["Count VII"]. The counterclaim defendants have replied to the counterclaims and now move this Court for their dismissal for failure to state a claim upon which relief can be granted.

DISCUSSION

At the outset, the Court finds that because Count I of the counterclaims seeks declaratory relief for exactly the same claims enumerated in both the underlying suit and the remaining counterclaims, it is duplicative and redundant and shall be dismissed. See generally, Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995) ("[D]istrict courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act %%% ."). Hence, only Counts II through VII of the counterclaims remain.

The counterclaim defendants have sought a judgment on the pleadings. Judgment on the pleadings pursuant to FRCvP 12(c) is appropriate "where material facts are undisputed and where a judgment on the merits is possible merely by considering the contents of the pleadings." Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 642 (2d Cir. 1988). The standard for granting a Rule 12(c) motion is the same as that of a Rule 12(b)(6) motion for failure to state a claim, in that the district court must accept the allegations in the complaint (or counterclaim, as the case may be) as true and draw all inferences in the non-moving party's favor. Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001)(citing Irish Lesbian & Gay Org. v. Giuliani, 143 F.3d 638, 644 (2d Cir.1998), Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir.1994) and Ad-Hoc Comm. of Baruch Black & Hispanic Alumni Ass'n v. Bernard M. Baruch Coll., 835 F.2d 980, 982 (2d Cir.1987)). In other words, the Court is required to read a complaint generously, accepting the material facts alleged therein as true and drawing all reasonable inferences from the complainant's allegations. California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 515 (1972); Frasier v. Gen. Elec. Co., 930 F.2d 1004, 1007 (2d Cir. 1991).

The material facts*fn6 which the Court accepts as true and which form the underpinning of the remaining Counts of the counterclaims are as follows. North American is a Toronto based importer and distributor of dental supply products and sells such products in United States interstate commerce. Included among the products North American imports into and distributes in the United States are the Ivoclar Vivadent products which are the subject of the instant suit and are manufactured by IvoclarAG outside of the United States. North American purchases the products outside of the United States (from either IvoclarAG directly or from one of IvoclarAG's authorized distributors) and sells them in the United States to dental supply companies who market directly to dentists*fn7 . The cost of the products when imported, purchased and sold in this manner is substantially lower than their cost when purchased inside of the States from Ivoclar. North American is therefore able to offer and sell them to the dental supply companies, and ultimately their customers, at competitive prices. The Ivoclar Vivadent products the defendants (North American and Kalfa) sell are the same as the products Ivoclar and its authorized distributors, including Peterson, sell in that they are all manufactured by IvoclarAG. The defendants admit that prior to the filing of the instant suit, the products were distributed without the Material Safety Data Sheets or any warranty. Since then, they have been including the Data Sheets and a disclaimer of association with Ivoclar. They have also been offering their own warranty on the products. The only difference remaining in the products are minor differences in the labeling and packaging. In October 2002, Peterson placed an order for some Ivoclar Vivadent products which the defendants sold. The counterclaim is silent as to whether Peterson purchased the product from the defendants or a dental supply company*fn8 who had purchased them from the defendants as the importer and wholesaler. Peterson then sent the products to Ivoclar. When Ivoclar determined that the products had not been purchased from either Ivoclar or Peterson, it informed the defendants that they did not have its permission to sell the trademarked products, demanded that they immediately stop their sale and disclose their supplier information. Ivoclar did not indicate to the defendants that the products they were selling were not genuine or commercially fit for distribution in the United States, or that they were materially different from the products sold here through Ivoclar. Ivoclar stated that if the defendants did not stop selling the unauthorized product, legal action would be taken. When the defendants did not comply, Ivoclar filed the instant suit*fn9 . Less than one month later, on May 12, 2004, the defendants informed Ivoclar that they considered the suit to be baseless and requested that it be discontinued. At the same time, the defendants offered to provide disclaimer information to all who purchased the Ivoclar Vivadent products from them indicating that they had no affiliation with Ivoclar and were not authorized to sell their product. They also stated that they would include the Material Safety Data Sheets when shipping the items to the consumers. Ivoclar responded that the disclaimer was insufficient and nevertheless declined to withdraw the suit but again asked for information regarding the defendants' supplier.

The portion of the Sherman Act, alleged to have been violated in counterclaim Count II, states that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." 15 U.S.C. §1.

The portion of the Wilson Tariff Act, alleged to have been violated in counterclaim Count III, states that

"every combination, conspiracy, trust, agreement, or contract is declared to be contrary to public policy, illegal, and void when the same is made by or between two or more persons or corporations, either of whom, as agent or principal, is engaged in importing any article from any foreign country into the United States, and when such combination, conspiracy, trust, agreement, or contract is intended to operate in restraint of lawful trade, or free competition in lawful trade or commerce, or to increase the market price in any part of the United States of any article or articles imported or intended to be imported into the United States, or of any manufacture into which such imported article enters or is intended to enter." 15 U.S.C. §8.

Section 340 of New York's General Business Law, alleged to have been violated in counterclaim Count ...


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