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GEA Westfalia Separator, Inc. v. GreenShift Corp.

May 20, 2010

GEA WESTFALIA SEPARATOR, INC., AND ACE ETHANOL, LLC, PLAINTIFFS,
v.
GREENSHIFT CORPORATION, DEFENDANT.



The opinion of the court was delivered by: McKENNA, D.J.

MEMORANDUM AND ORDER

1.

In this action, plaintiffs -- GEA Westfalia Separator, Inc. ("Westfalia") and Ace Ethanol, LLC ("Ace Ethanol") --seek a declaratory judgment, under the Declaratory Judgment Act, 28 U.S.C. § 2201, that a patent recently issued to defendant GreenShift by the U.S. Patent and Trademark Office (the "Patent Office") for the recovery of corn oil from thin stillage is invalid. Plaintiffs also seek a declaration that any activities by Westfalia and Ace Ethanol relating to corn oil recovery do not infringe that patent. In addition, Plaintiffs seek to enjoin GreenShift from continuing to engage in a coordinated campaign of false advertising and deceptive business practices relating to its claimed intellectual property rights. (First Amended Complaint ("FAC") ¶ 1.) Defendant -- GreenShift Corporation ("GreenShift") -- moves, pursuant to Fed. R. Civ. P. 12(b)(1), or, alternatively, id. 12(b)(6), for an order dismissing plaintiffs' Third, Fourth and Fifth claims, alleging, respectively, (i) the violation of the Lanham Act, Section 43, 15 U.S.C. § 1125 (a), (ii) the violation of New York General Business Law §§ 349, 350 and 350-a, and (iii) common law unfair competition. The claims relate to communications by GreenShift to customers of Westfalia (including Ace Ethanol), among others, claiming that a process to recover corn oil using equipment manufactured and sold by Westfalia would infringe a patent for which GreenShift had applied and has since, on or about October 13, 2009, obtained. GreenShift's communications allegedly constitute "false or misleading descriptions or representations of fact." (FAC ¶¶ 124 (Third Claim), 130 (Fourth Claim), and 135 (Fifth Claim).)

2.

"When ruling on a motion for dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court must accept the material facts alleged in the complaint as true and construe all reasonable inferences in the plaintiff's favor." Querim v. E.E.O.C., 111 F. Supp. 2d 259, 263 (S.D.N.Y. 2000). "To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient 'to raise a right to relief above the speculative level.'" ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (footnote omitted)). Similar principals apply to motions under Fed. R. Civ. P. 12(b)(1) based on alleged lack of standing.

Connecticut v. Physicians Health Servs. of Conn. Inc., 287 F.3d 110, 114 (2d Cir. 2002).

3.

The Court considers first GreenShift's argument that plaintiffs do not have standing to assert the Third, Fourth and Fifth claims.

Plaintiffs state that, "[b]ecause [the Fourth and Fifth] claims substantially duplicate Plaintiffs' Lanham Act claim, Plaintiffs do not oppose their dismissal." (Pl. Mem. at 1 n.1.) The Fourth and Fifth claims will, therefore, be dismissed.

GreenShift argues that plaintiffs do not have standing to pursue their Lanham Act claim against GreenShift because neither Westfalia nor Ace Separator competes with GreenShift. (Def. Mem. at 7 (citing Telecom Int'l Am., Ltd. v. AT&T Corp., 280 F.3d 175, 197 (2d Cir. 2001)).)

The Second Circuit case law, however, does not require that the plaintiff in a Lanham Act Section 43 claim be a direct competitor. Rather:

To establish standing for a false advertising claim under section 1125(a) of the Lanham Act, the aggrieved party must demonstrate "a reasonable interest to be protected against the advertiser's false or misleading claims, and a reasonable basis for believing that this interest is likely to be damaged by the false or misleading advertising." The likelihood of injury and causation " will not be presumed, but must be demonstrated in some manner." However, the type and quantity of proof we have required to show injury and causation has varied from case to case. Generally, we have tended to require a more substantial showing where the plaintiff's products are not obviously in competition with the defendant's products, or the defendant's advertisements do not draw direct comparisons between the products.

Societe des Hotels Meridien v. LaSalle Hotel Operating P'ship, L.P., 380 F.3d 126, 130 (2d Cir. 2004) (quoting Ortho Pharm. Corp. v. Cosprophar, Inc., 32 F.3d 690, 694 (2d Cir. 1994) and Coca-Cola Co. v. Tropicana Prods., Inc., 690 F.2d 312, 316 (2d Cir. 1982), abrogated on other grounds by Fed. R. Civ. P. 52(a)).

Here, plaintiffs have alleged facts which adequately establish standing to assert a Lanham Act Section 43 claim against GreenShift. Plaintiff Ace Ethanol, using a centrifuge, manufactured by and purchased from Westfalia, produces ethanol from corn. (FAC ¶ 37) Westfalia alleges that, through "know-how and expertise," a process with its centrifuge can recover additional corn oil from what is called thin stillage, a byproduct of the derivation of ethanol from corn oil, which additional corn oil can then be sold for a number of applications. (FAC ¶¶ 32-33, 35) In July (and again in October) of 2009, according to the FAC (¶¶ 77, 109), GreenShift sent letters to (among others) users of Westfalia centrifuges, claiming that those entities were producing corn oil by practices that come within the scope of GreenShift's published patent applications. Those letters, according to plaintiffs, were false. "Several of Westfalia's customers blamed [Westfalia] for what they erroneously believed to be their liability to GreenShift and demanded ...


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