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Ivoclar Vivadent, Inc. v. Northeast Dental & Medical Supplies

August 30, 2006

IVOCLAR VIVADENT, INC., PLAINTIFF,
v.
NORTHEAST DENTAL & MEDICAL SUPPLIES, INC. AND NORHTEAST DENTAL SUPPLIES, INC., DEFENDANTS.
NORTHEAST DENTAL AND MEDICAL SUPPLIES, 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 Northeast Dental & Medical Supplies, Inc. and Northeast Dental Supplies, Inc. (collectively, "Northeast"), and the other defendants in these different 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. #8) and on December 13, 2004 Northeast filed its answer*fn3 with counterclaims (Dkt. #12). On March 8, 2005 Ivoclar filed its reply to the counterclaims (Dkt. #17) and on September 22, 2005, also filed a motion pursuant to FRCvP 12(c) to dismiss those counterclaims (Dkt. #21), which is currently pending before the Court. Also pending are Northeast's motions for a protective order (Dkt. #26) and to compel (Dkt. #30) and Ivoclar's motions to compel (Dkt. #34) and for a stay (Dkt. #35).

The Amended Complaint alleges the following. Ivoclar is in the business of marketing, distributing and selling dental products nationally and internationally. Northeast is a New York corporation that also sells and distributes, among other things, dental products. 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. Northeast unlawfully gained possession of some of Ivoclar's products (those enumerated in the complaint) and imported them into the United States. Northeast then sold them without Ivoclar's permission or consent. Further, Northeast distributed the 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 Northeast refused to stop selling its products or identify their source of supply when so requested by Ivoclar and continues 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.

Northeast's counterclaims seek (1) a judicial declaration under the Declaratory Judgment Act, 28 U.S.C. §2201 et seq. ("the DJA") that Northeast is 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 Northeast 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 [DJA] %%% "). 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 Northeast's counterclaims are as follows. Northeast sells genuine Ivoclar Vivadent products at lower prices than the same products sold by Ivoclar and its authorized distributors, including Peterson. Northeast gets these products from its supplier, North American Dental Wholesalers, Inc., a Toronto based importer and distributor of dental supply products ("N. American")*fn7 . The products N. American sells to Northeast are manufactured by IvoclarAG outside of the United States. N. American obtains them outside of the United States from either IvoclarAG directly or from one of IvoclarAG's authorized distributors, then imports them into the States. The cost of the products when purchased in this manner is substantially lower than their cost when purchased inside of the States from Ivoclar. Northeast is therefore able to offer and sell them to its customers at competitive prices. The Ivoclar Vivadent products Northeast sells are the same as the products Ivoclar and Peterson sell in that they are all manufactured by IvoclarAG. Northeast admits that, prior to the filing of the instant suit, the products were distributed without including the Material Safety Data Sheets or any warranty. Since then, they have been including these Data Sheets and a disclaimer of association with Ivolcar. It has also been offering its own warranty on the products. The only difference remaining in the products are minor differences in the labeling and packaging. In or about September 2002, Northeast began marketing the Ivoclar Vivadent trademarked products enumerated in the complaint to approximately 20,000 dentists in the northeast United States at discounted prices. In October 2002, Peterson placed an order with Northeast, purchased some of the products and then sent them to Ivoclar. When Ivoclar determined that the products had not been purchased from either Ivoclar or Peterson, it informed Northeast that it did not have permission to sell the trademarked products, demanded that Northeast immediately stop its sale and disclose their supplier information. Ivoclar did not indicate to Northeast that the products it was 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 Northeast did not stop selling the unauthorized product, legal action would be taken. When Northeast did not comply, Ivoclar filed the instant suit*fn8 . Less than one month later, on May 12, 2004, Northeast informed Ivoclar that it considered the suit to be baseless and requested that it be discontinued. At the same time, Northeast offered to provide disclaimer information to all who purchased the Ivoclar Vivadent products from it indicating that it had no affiliation with Ivoclar and was not authorized to sell its product. It also stated that it 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 Northeast's 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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