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Carson Optical, Inc. v. Prym Consumer USA, Inc.

United States District Court, E.D. New York

March 28, 2014

CARSON OPTICAL, INC. and LEADING EXTREME OPTIMIST INDUSTRIES, LTD., Plaintiffs,
v.
PRYM CONSUMER USA, INC. and JO-ANN STORES, INC., Defendants

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For Jo-Ann Stores, Inc., Movant: Emily Joy Mathieu, LEAD ATTORNEY; Richard A. DePalma, Thompson Hine LLP, New York, NY; Jeffrey R. Schaefer, PRO HAC VICE, LEAD ATTORNEY, Ulmer & Berne LLP, Cincinnati, OH; Robert E. Chudakoff, PRO HAC VICE, LEAD ATTORNEY, Ulmer & Berne LLP, Cleveland, OH.

For Carson Optical, Inc., Leading Extreme Optimist Industries, LTD., Plaintiffs: John Richard Horvack, LEAD ATTORNEY, Carmody & Torrance LLP, New Haven, CT; John Louis Cordani, Carmody & Terrance LLP, New Haven, CT.

For Prym Consumer USA, Inc., Defendant: Stephen J. Smirti, Jr., LEAD ATTORNEY; Celeste M. Butera, Michael C. Cannata, Rivkin Radler LLP, Uniondale, NY.

For Prym Consumer USA, Inc., Counter Claimant: Stephen J. Smirti, Jr., LEAD ATTORNEY, Celeste M. Butera, Michael C. Cannata, Rivkin Radler LLP, Uniondale, NY.

For Carson Optical, Inc., Leading Extreme Optimist Industries, LTD., Counter Defendants: John Richard Horvack, LEAD ATTORNEY, Carmody & Torrance LLP, New Haven, CT; John Louis Cordani, Carmody & Terrance LLP, New Haven, CT.

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MEMORANDUM AND ORDER

ARLENE R. LINDSAY, United States Magistrate Judge.

Plaintiff Carson Optical, Inc. (" Carson Optical" or " Carson" ), a New York corporation that markets and sells optical products, and plaintiff Leading Extreme Optimist Industries, Ltd. (" Leading'), a Hong Kong company that manufactures optical products (collectively " plaintiffs" ), commenced this action on July 29, 2011 against defendant Prym Consumer USA, Inc. (" Prym" ), a manufacturer of magnification products, and commenced an action on January 6, 2012 against defendant Jo-Ann Stores, Inc., a retailer of Prym's products (" Jo-Ann Stores" ) (collectively " defendants" ), alleging patent infringement under 35 U.S.C. § 271 et seq., trade dress infringement under the Lanham Act, 15 U.S.C. § 1125(a), and state law claims for unfair competition and tortious interference with prospective business relations in connection with four of plaintiff Carson Optical's design patents. All of the claims relate to magnifiers that were sold by Prym to Jo-Ann Stores, and then sold at retail by Jo-Ann Stores.

By order dated March 9, 2012, the district court consolidated the two actions. On November 27, 2012, the parties consented to the undersigned's jurisdiction pursuant to 28 U.S.C. § 636. Defendants each filed motions for partial judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c),

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and by Memorandum and Order dated March 25, 2013, the Court granted defendants' motions and granted plaintiffs leave to replead. Plaintiffs filed their second amended consolidated complaint on April 16, 2013. Before the Court are each defendants' partial motions to dismiss the second amended consolidated complaint pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, defendants' motions are granted.

BACKGROUND

For purposes of this decision, the Court accepts as true the factual allegations set forth in the second amended consolidated complaint against defendants and documents attached thereto. Carson Optical markets and sells optical products throughout the country to retailers, including until recently, Jo-Ann Stores. (Second Am. Consol. Compl. ¶ ¶ 2, 32.) At issue in this case are three[1] of Carson Optical's design patents, to wit, U.S. Patent Nos. D495,726 S (" the '726 Patent" ), D563,779 S (" the '779 Patent'), and D508,063 S (" the '063 Patent" ), which were issued by the United States Patent and Trademark Office. ( Id. at. ¶ ¶ 10-21.) The commercial embodiment of the '726 Patent is a product that bears the trademark RimFree. ( Id. at. ¶ 13.) The commercial embodiment of the '779 Patent is a product that bears the trademark Attach-A-Mag. ( Id. at. ¶ 17.) The commercial embodiment of the '063 Patent is a product that bears the trademark Attach-a-Mag. ( Id. at. ¶ 21.)

The designs of certain of Carson Optical's products, such as the SureGrip[2] and the Clip & Flip[3] are not protected by design patents but have been marketed, promoted and sold under their trademarks. ( Id. at. ¶ ¶ 22-31.) The SureGrip[TM] and the Clip & Flip[TM] products have been a commercial success. ( Id.) Carson Optical has also developed written materials, including packaging materials which describe the features and benefits of its Clip & Flip[TM] magnifier, and owns the copyright in the written marketing materials. ( Id. at. ¶ ¶ 30-31.)

According to Carson Optical, Prym secured a manufacturer to copy and reproduce Carson Optical's products, and Jo-Ann Stores conspired with Prym to accomplish this. ( Id. at. ¶ ¶ 33-34.) Specifically, plaintiffs allege that defendants imported, offered for sale and sold (i) a magnifier that infringes the '726 Patent; (ii) a product that infringes the '779 Patent; (iii) a product that infringes the '063 Patent; (iv) a magnifier that is a copy of Carson Optical's SureGrip[TM] magnifier and infringes Carson's trade dress rights; and (v) a copy of Carson Optical's Clip & Flip[TM] magnifier. ( Id. at. ¶ ¶ 35-39.) In addition, plaintiffs aver that Prym copied portions of Carson Optical's written marketing materials associated with the Clip & Flip[TM] magnifier. ( Id. at. ¶ 40.) Because of Prym's alleged infringement, plaintiffs maintain that Prym displaced Carson Optical as a supplier to Jo-Ann Stores. ( Id. at. ¶ 41.) Jo-Ann's alleged infringement eliminated

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Carson Optical as its supplier. ( Id. at. ¶ 42.)

Plaintiffs commenced the instant action against defendants, alleging (i) infringement of the design patents; (ii) infringement of trade dress; and (iii) common law claims for unfair competition. In addition, plaintiffs allege against defendant Prym a common law claim for tortious interference with prospective business relations. Defendants now seek to dismiss plaintiffs' common law tort claims and trade dress infringement claim, specifically Counts Seven and Nine in the second amended consolidated complaint against Jo-Ann Stores[4] and Counts Seven, Eight and Ten in the second amended consolidated complaint against Prym.

DISCUSSION

(A) Legal Standard for Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(6)

In reviewing a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the Court must accept " as true all allegations in the complaint and draw all reasonable inferences in favor of the non-moving party." Matson v. Bd. of Educ. of the City Sch. Dist. of N.Y., 631 F.3d 57, 63 (2d Cir. 2011) (internal quotation marks and citation omitted). However, " the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). " In order to survive a motion to dismiss under 12(b)(6), a complaint must allege a plausible set of facts sufficient 'to raise a right to relief above the speculative level'." Operating Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt. LLC, 595 F.3d 86, 91 (2d Cir. 2010) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); see Ruston v. Town Bd. for the Town of Skaneateles, 610 F.3d 55, 59 (2d Cir. 2009) (" When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief" ). " A pleading that offers 'labels and conclusions' or a 'formulaic recitation of the elements of a cause of action will not do.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). " The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant acted unlawfully." Id. at 678. That is, " [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." Twombly, 550 U.S. at 570. Determining plausibility is " a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679.

For the purposes of a Rule 12(b)(6) motion, " a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint." DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010). A district court may also consider " matters of which judicial notice may be taken or . . . documents either in plaintiffs' possession or of which plaintiffs had knowledge

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and relied on in bringing suit." Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (internal quotation marks and citation omitted).

(B) Plaintiffs' Common Law Claims

Plaintiffs assert a common law claim for unfair competition against defendant Prym (Count Eight) and defendant Jo-Ann Stores (Count Nine) and a common law claim for tortious interference with prospective business relations against defendant Prym (Count Ten). With respect to defendant Prym, plaintiffs assert that Prym has engaged in conduct constituting common law unfair competition by:

a. Copying and reproducing Carson's products, including the RimFree,[TM] the distinctive elements of the SureGrip[TM] magnifier and the Clip & Flip[TM] magnifier in order to cause confusion, and the Attach-A-Mag[TM] product;
b. Providing knock-offs of Carson's products to Jo-Ann Stores;
c. Securing of Jo-Ann Stores as a customer by importing, offering for sale, and selling products that infringe Carson and Leading's intellectual property rights;
d. Copying portions of Carson's written marketing materials associated with the Clip & Flip[TM] magnifier;
e. Systematically infringing Carson's and other's intellectual property rights, including the '726 Patent, and thereby unfairly competing with Carson; and/or
f. Displacing Carson as a supplier to Jo-Ann Stores by illegally copying Carson's product(s).

(Second Am. Consol. Compl., ¶ ¶ 93, 116.) With respect to defendant Jo-Ann Stores, plaintiffs assert that Jo-Ann Stores has engaged in conduct constituting common law unfair competition by:

a. Copying and reproducing Carson's products, including the RimFree,[TM] the distinctive elements of the SureGrip[TM] magnifier and the Clip & Flip[TM] magnifier in order to cause confusion, and the Attach-A-Mag[TM] product;
b. Securing and selling to the consuming public a line of knock-off products;
c. Eliminating Carson as a long-time supplier by systematically copying Carson's products and violating its intellectual property rights in the process;
d. Selling products with marketing materials that contained copied portions of Carson's written marketing materials;
e. Systematically infringing Carson's and other's intellectual property rights, including patent rights, trade dress rights and/or copyright rights, and thereby unfairly harming Carson;
f. Even after ceasing its campaign of infringing activity refusing to continue its long-time supplier relationship with Carson; and/or
g. Pretending to fairly evaluate Carson as a supplier with no intention of continuing its business relationship with Carson and misrepresenting to Carson that Carson would be fairly evaluated when Jo-Ann knew that Carson would not be fairly evaluated.

( Id. at ¶ ¶ 120, 128.)

Additionally, as to defendant Prym, plaintiffs allege that Prym engaged in dishonest, unfair, and/or improper means to interfere with Carson's prospective relations with Jo-Ann Stores by engaging in

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the course of conduct enumerated above and by exerting unfair economic pressure on Carson by pricing its goods at a predatory level for the specific purpose of ousting Carson as Jo-Ann Store's vendor. Plaintiffs assert that Prym's predatory pricing was a result of Prym's (a) misappropriating Carson's skills, efforts, and labor in designing and developing unique magnifier designs and marketing materials, (b) misappropriating Carson's goodwill by knocking off Carson's distinctive tradedress, and (c) using inferior materials in its goods with the purpose of instead trading on Carson's goodwill. ( Id. at ¶ ¶ 132-33.)

Defendants argue, however, that plaintiffs' state law claims are preempted by federal patent law.

(1) Preemption of Common Law Torts

" Federal Circuit law governs whether federal patent law preempts a state law claim." Ultra-Precision Mfg., Ltd. v. Ford Motor Co., 411 F.3d 1369, 1376 (Fed. Cir. 2005). A state law claim is preempted if it " 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" Id. at 1377 (quoting Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262, 99 S.Ct. 1096, 59 L.Ed.2d 296 (1979)). Federal patent law preempts a state law claim that " offer[s] patent-like protection to intellectual property inconsistent with the federal scheme." Dow Chem. Co. v. Exxon Corp., 139 F.3d 1470, 1475 (Fed. Cir. 1998). The preemption inquiry focuses on the specific conduct underlying the state law claim. See Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318 (Fed. Cir. 1998), overruled in part on other grounds by Midwest Ind. Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1360-61 (Fed. Cir. 1999) ( en banc in part). In Hunter Douglas, the Federal Circuit instructed:

[t]o determine whether these state law torts are in conflict with federal patent law and accordingly preempted, we assess a defendant's allegedly tortious conduct. If a plaintiff bases its tort action on conduct that is protected or governed by federal patent law, then the plaintiff may not invoke the state law remedy, which must be preempted for conflict with federal patent law. Conversely, if the conduct is not so protected or governed, then the remedy is not preempted. This approach, which considers whether a state law tort, 'as-applied,' conflicts with federal patent law, is consistent with that employed by the Supreme Court in cases involving preemption of state unfair competition law.

153 F.3d at 1336. " To survive preemption, [plaintiffs] must plead conduct in violation of [state law] that is separate and independent from its patent law claim." Veto Pro Pac, LLC v. Custom Leathercraft Mfg. Co., No. 3:08-cv-302 (VLB), 2009 WL 276369, at *2 (D. Conn. Feb. 5, 2009). That is, patent law will not preempt state law claims if such claims " include additional elements not found in the federal patent law cause of action and if they are not an impermissible attempt to offer patent-like protection to a ...


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