United States District Court, S.D. New York
OPINION AND ORDER
NELSON S. ROMN, District Judge.
Radiancy ("Plaintiff") commenced this action against Viatek ("Defendant" and "Counterclaim Plaintiff") under 35 U.S.C. §§ 271 and 281 for patent infringement and pursuant to 15 U.S.C. § 1125(a) for false advertising, trade dress infringement, trademark infringement, and unfair competition. In defense, Defendant asserted twenty-one Affirmative Defenses and seven Counterclaims against Radiancy and its parent company, PhotoMedex, Inc. (together, "Counterclaim Defendants"). Before the Court is Counterclaim Defendants' motion to strike Affirmative Defenses six, seven, and twenty-one pursuant to Fed.R.Civ.P. 9(b) and 12(f), dismiss PhotoMedex, Inc. from this action pursuant to Fed.R.Civ.P. 12(b)(5) and (6), and dismiss the Second Counterclaim pursuant to Rule 12(b)(1), the Third Counterclaim pursuant to Rule 9(b) and 12(b)(6), and the Fourth and Fifth Counterclaims pursuant to Rule 12(b)(6). For the following reasons, Counterclaim Defendant's motion is granted in part and denied in part with Counterclaim Plaintiff granted leave to amend its Sherman Act claims only.
Plaintiff is a Delaware company specializing in skincare products, specifically light and heat-based skincare equipment for professionals and household consumers. Amend. Compl. ¶ 2. Plaintiff obtained U.S. Patent No. 7, 170, 034 ("the 034 Patent") from the United States Patent and Trademark Office ("USPTO") for its product no!no!® Hair, which is a handheld device that uses heat to remove hair. Id. at ¶ 4 & Ex. 1. The 034 Patent is entitled "PULSED ELECTRIC SHAVER" and was granted on January 30, 2007. Id. In addition to the 034 Patent, Plaintiff is also the owner of Patent No. 6, 825, 445 ("the 445 Patent"), entitled "REAL ELECTRIC SHAVER." Counterclaim ¶ 8 & Ex. B. On December 13, 2011 PhotoMedex, Inc. and Radiancy effectuated a reverse merger whereby Radiancy became a wholly-owned subsidiary of PhotoMedex. Counterclaim ¶ 2; Douglass Dec. Ex. K. Following the merger, the pre-merger shareholders of PhotoMedex owned approximately 20% of the outstanding common stock in PhotoMedex and its subsidiaries while the pre-merger shareholders of owned approximately 80% of the outstanding common stock of PhotoMedex and its subsidiaries. Douglass Dec. Ex. K.
Defendant is a Florida corporation that develops, manufacturers, and markets home goods and personal care products, including hair removal devices, personal fans, flashlights, beauty products, dental products, kitchen supplies, and cleaning products. Counterclaim ¶ 1. Defendant manufacturers and sells the Pearl Hair Remover, the allegedly infringing product. Amend. Compl. ¶ 5. Defendant also manufacturers the Samba, a hot wire hair removal device that does not use a pulsed heating source. Counterclaim ¶ 32. The Samba was first sold on August 27, 2013 by ShopNBC, one of Defendant's customers. Id. Plaintiff alleges that in Defendant's advertising of its hair removal products, Defendant uses false and misleading information to confuse consumers, including directly lifting photographs and videos from Plaintiff's advertising materials and using them to promote the Pearl Hair Remover. Id. at ¶¶ 20-22.
Plaintiff first confronted Defendant about the alleged patent infringement in a letter sent on April 27, 2012. Ratner Dec. Ex. G. In that letter, Plaintiff stated that it believed Defendant was infringing both the 034 Patent and the 445 Patent. Id. Subsequent exchanges between the parties show that Viatek contested Radiany's assertion of infringement and that Radiancy did not change its original position.
Plaintiff brought suit against Defendant alleging violations of 35 U.S.C. §§ 271 and 281, based on belief that Defendant "markets, distributes, advertises, uses, offers for sale, sells and imports into the United States the Pearl Hair Remover, which infringes the 034 Patent." Amended Complaint ("Amend. Compl.") ¶ 5. Plaintiff's Amended Complaint also claims that Defendant violated Section 43(a) of the Latham Act (15 U.S.C. § 1125(a)) by engaging in false advertising, trade dress infringement, trademark infringement, and unfair competition. Id.
II. Procedural History
Following the filing of this action on June 3, 2013, Plaintiff filed an Amended Complaint on June 24, 2013, in which it added claims for false advertising, trade dress infringement, and unfair competition to its claims of patent infringement. Viatek filed an Answer and Counterclaims on September 23, 2013. Dock. No. 22. An Amended Answer with Counterclaims was filed on September 29, 2013. Dock. No. 24. Viatek filed a Second Amended Answer and Counterclaims on October 1, 2013. Dock. No. 26. In its Second Amended Answer and Counterclaim ("Sec. Amend. Ans. & Counterclaims"), Viatek asserts twenty-one affirmative defenses and seven counterclaims against Counterclaim Defendants. The present motion to strike addresses three affirmative defenses (the Sixth, for inequitable conduct, the Seventh, for violation of the best mode requirement, and the Twenty-First, for unclean hands) and four counterclaims (the Second, for declaratory judgment of noninfringment and invalidity of the 445 patent, the Third, for violation of Section 2 of the Sherman Act, the Fourth, for unfair competition, and the Fifth, for tortious interference), and seeks to dismiss PhotoMedex, Inc. from the action.
III. Legal Standards
a. Motion to Strike Affirmative Defenses
"The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). In order to prevail on a motion to strike affirmative defenses under Fed.R.Civ.P. 12(f), plaintiff must satisfy the following three-part test: "(1) there must be no question of fact that might allow the defense to succeed; (2) there must be no substantial question of law that might allow the defense to succeed; and (3) the plaintiff must be prejudiced by the inclusion of the defense." Coach, Inc. v. Kmart Corps., 756 F.Supp.2d 421, 425 (S.D.N.Y. 2010) (citation omitted). "In assessing the sufficiency of an affirmative defense, the Court should construe the pleadings liberally to give the defendant a full opportunity to support its claims at trial, after full discovery has been made.'" Cartier Int'l AG v. Motion in Time, Inc., No. 12 Civ. 8216(JMF), 2013 WL 1386975, at *3 (S.D.N.Y. 2013) (quoting Coach, Inc., 756 F.Supp.2d at 425). "Increased time and expense of trial may constitute sufficient prejudice to warrant striking an affirmative defense." Coach, Inc., 756 F.Supp.2d at 426.
b. Motion to Dismiss Counterclaim
"A motion to dismiss a counterclaim is evaluated under the same standard as a motion to dismiss a complaint." Revonate Mfg., LLC v. Acer Am. Corp., No. 12 Civ. 6017(KBF), 2013 WL 342922, at *2 (S.D.N.Y. Jan. 18, 2013) (citation omitted). On a motion to dismiss under Fed.R.Civ.P. 12(b)(6), dismissal is proper unless the complaint "contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (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." Iqbal, 556 U.S. at 678. "Although for the purposes of a motion to dismiss [a court] must take all of the factual allegations in the complaint as true, [it is] not bound to accept as true a legal conclusion couched as a factual allegation.'" Id. (quoting Twombly, 550 U.S. at 555).
When there are well-pleaded factual allegations in the complaint, "a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal, 556 U.S. at 679. It is not necessary for the complaint to assert "detailed factual allegations, " but must allege "more than labels and conclusions." Twombly, 550 U.S. at 555. "[A] formulaic recitation of the elements of a cause of action will not do." Id. The facts in the complaint "must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true." Id. Ultimately, determining whether a complaint states a facially plausible claim upon which relief may be granted is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.
c. Applicable Law
The United States Court of Appeals for the Federal Circuit has "exclusive jurisdiction of an appeal from a final decision of a district court of the United States... in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents." 28 U.S.C. § 1295(a)(1). Based on the Federal Circuit's jurisdiction, a "district court must... follow Federal Circuit precedent in a case arising under the patent laws." Foster v. Hallco Mfg. Co., Inc., 947 F.2d 469, 475 (Fed. Cir. 1991). A case "aris[es] under the patent laws" if the complaint establishes that "plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims." Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 809 (1988). If a plaintiff presents a claim "supported by alternative theories in the complaint, " that claim does not depend on patent law and accordingly Federal Circuit precedent is not controlling. Id. at 810. "In other words, an antitrust claim only gives rise to Federal Circuit jurisdiction and only necessitates the application of Federal Circuit law, if patent law is essential to each of [the] theories" of liability under the antitrust claims alleged in the complaint.'" In re Lipitor Antitrust Litigation, Master Docket No. 3:12-cv-2389 (PGS), 2013 WL 4780496, at *14 (D.N.J. Sept. 5, 2013) (quoting Christianson, 486 U.S. at 809).
a. PhotoMedex Should be Dismissed From this Action
i. Improper Service
Under Fed.R.Civ.P. 12(b)(5), a defendant may move to dismiss on the basis that service of process was improper. Fed.R.Civ.P. 12(b)(5). Without proper service, the court lacks personal jurisdiction over the defendant. Under New York law, a corporation may be served by personal service on a director, officer, managing or general agent, or cashier or assistant cashier, or any other agent authorized by law to accept service. N.Y. C.P.L.R. § 311(a)(1); Fed.R.Civ.P. 4(e)(1), (h).
"New York Courts have consistently held that service of process on one corporation does not confer jurisdiction over another, even where one corporation may wholly own another, or where they may share the same principals." McKibben v. Credit Lyonnais, No. 98 Civ. 3358 LAP, 1999 WL 604883, at *3 (S.D.N.Y. Aug. 10, 1999) (internal quotation and citation omitted). "The standards set in Rule 4(d) for service on individuals and corporations are to be liberally construed, to further the purpose of finding personal jurisdiction in cases in which the party has received actual notice." Grammenos v. Lemos, 457 F.2d 1067, 1070 (2d Cir. 1972). "But there must be compliance with the terms of the rule, and absent waiver, incomplete or improper service will lead the court to dismiss the action unless it appears that proper service may still be obtained." Id.
Before Viatek filed its Counterclaims, PhotoMedex, Inc. was not a party to this action. As such, Viatek was required to serve PhotoMedex, Inc. in accordance with New York law. Viatek served PhotoMedex by electronically serving a copy of the Answer and Counterclaims on Radiancy's counsel. Sec. Amend. Ans. & Counterclaims p. 54. This is not proper service on PhotoMedex. In order to effectuate proper service, Viatek needed to serve PhotoMedex, Inc., a company, pursuant to C.P.L.R. § 311. There was no personal service made on PhotoMedex's directors, officers, or agents, and Radiancy's counsel was not authorized to accept service on behalf of PhotoMedex. Even if Viatek were given leave to properly effectuate service, such service would be futile because Viatek does not satisfy the standard under Delaware law for piercing the corporate veil and holding PhotoMedex liable for Radiancy's harms.
ii. Piercing the Corporate Veil
In order to hold PhotoMedex liable for Radiancy's actions, Viatek must seek to pierce the Radiancy's corporate veil. "It is a general principle of corporate law deeply ingrained in our economic and legal systems' that a parent corporation (so-called because of control through ownership of another corporation's stock) is not liable for the acts of its subsidiaries." U.S. v. Bestfoods, 524 U.S. 51, 61 (1998). It is equally ingrained, however, that in certain ...