Zuckerman Family Farms, Inc. et al v. Bidart Bros.

Filing 18

ORDER Denying Plaintiffs' 4 Motion for Preliminary Injunction and Granting Defendant's 8 Motion to Dismiss, signed by District Judge Anthony W. Ishii on 12/17/2014. (Any amended complaint must be filed within 60 days of the date of this order.) (Gaumnitz, R)

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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT FOR THE 7 EASTERN DISTRICT OF CALIFORNIA 8 9 10 11 12 ZUCKERMAN FAMILY FARMS, INC., a California corporation; and BELLA BRANDS, LLC, a California limited liability company, Plaintiffs, 13 14 1:14-cv-01529-AWI-BAM ORDER DENYING PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION AND GRANTING DEFENDANT’S MOTION TO DISMISS v. (Docs. 4, 8) 15 16 17 18 BIDART BROS., a California corporation, and DOES 1 through 20, inclusive, Defendants. __________________________________/ 19 20 21 22 I. INTRODUCTION Plaintiffs, Zuckerman Family Farms and Bella Brands, LLC (collectively “Plaintiffs”), 23 have filed suit against Bidart Bros. (“Defendant”) for violation of the Plant Variety Protection 24 Act (“PVPA”), the Lanham Act, and California Business Practices Code section 17200 et seq.. 25 Plaintiff alleges that Defendant imported, planted, and propagated Sifra, a variety of potato 26 protected under PVPA, without authorization. (Jochimsen Decl. at ¶ 6.) Plaintiff now seeks a 27 preliminary injunction enjoining Defendant from propagating and/or selling any Sifra seed or 28 1 1 fresh potatoes. For the following reasons, Plaintiffs‟ motion for preliminary injunction will be 2 denied and Defendant‟s motion to dismiss will be granted. 3 II. FACTUAL BACKGROUND On February 8, 2008, HZPC Holland B.V., a Netherlands limited company (“HZPC”), 4 5 obtained registration in the Netherlands for a new potato variety that is now known as Sifra. 6 Complaint (“Compl.”) at ¶ 13. On April 3 of the same year, HZPC applied to the United States 7 Department of Agriculture (“USDA”) for plant variety protection for Sifra. Id. at ¶ 13. On July 8 16, 2012 HZPC was issued a PVPA certificate for Sifra. Id. at ¶ 16; Exh. B. 9 On June 22, 2011, HZPC Americas Corp., the North American subsidiary of HZPC, 10 entered into a Sifra production agreement with Zuckerman Family Farms, Inc. (“Zuckerman”) 11 that provides, inter alia: 12 [Until December 31, 2016, Zuckerman] is authorized to certify [Sifra] seed potatoes … for its own use and shall have the Priority Right for marketing and sales of seed potatoes1 of the [v]ariety in the States of California, Oregon, and Washington. Priority right is defined as the right of [Zuckerman] to first right of refusal to use or market seed of the [v]ariety in California, Oregon, and Washington…. … In January of each year the parties shall meet and/or exchange information which shall accurately set forth the amount of seed potatoes of the [v]ariety sold to or through [Zuckerman] as well as the amount of seed potatoes of the [v]ariety sold by HZPC to other purchasers in California, Oregon, and Washington…. 13 14 15 16 17 18 19 Exhibit A to Compl. (“Sifra Production Agreement” or “Agreement”) at §§ E, H. 20 Defendant is alleged to have received Sifra potatoes from a source other than Zuckerman 21 22 or HZPC and without the authorization of either. Compl. at ¶ 26. Plaintiffs allege that Defendant 23 is now “marketing, conditioning, offering for sale, exposing for sale, stocking the variety for 24 sale, exporting from the United States and selling Sifra potatoes without the required PVPA 25 notice.” Id. at ¶ 26. As a result of Defendant‟s unauthorized sale of Sifra (below the price offered 26 by Plaintiffs), Plaintiffs allege that they have been substantially impacted in the sale of as many 27 28 1 The Sifra Production Agreement draws a distinction between “seed” and “table” stock. The former are used for propagation; the latter are used for table consumption. 2 1 as 280,000 fifty-pound units of their Bella Blanca brand potatoes. Id. at ¶ 28. 2 3 4 5 III. PRELIMINARY INJUNCTION A. Standard for Issuance of Preliminary Injunction Federal Rule of Civil Procedure 65(a) governs requests for preliminary injunctions. “A 6 plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, 7 that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of 8 equities tips in his favor, and that an injunction is in the public interest.” Winter v. Natural 9 Resources Defense Council, Inc., 555 U.S. 7, 20 (2008). “A preliminary injunction is an 10 extraordinary remedy never awarded as of right. In each case, courts „must balance the 11 competing claims of injury and must consider the effect on each party of the granting or 12 withholding of the requested relief.‟ „In exercising their sound discretion, courts of equity 13 should pay particular regard for the public consequences in employing the extraordinary remedy 14 of injunction.‟” Winter, 555 U.S. at 24 (internal citations omitted); see Lopez v. Brewer, 680 15 F.3d 1068, 1072 (9th Cir.2012) (A preliminary injunction is a “drastic remedy that should not be 16 granted unless the movant, by a clear showing, carries the burden of persuasion.”). The Ninth 17 Circuit has adopted a sliding scale approach to preliminary injunctions in which an injunction 18 may issue “where the likelihood of success is such that „serious questions going to the merits 19 were raised and the balance of hardships tips sharply in [plaintiffs] favor.‟” Alliance for the Wild 20 Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011) (citing Clear Channel Outdoor, Inc. v. 21 City of Los Angeles, 340 F.3d 810, 813 (9th Cir. 2000)). 22 23 B. Likelihood of Success on the Merits Plaintiffs have pled three causes of action; each could independently serve as the basis for 24 a preliminary injunction. Each is analyzed separately below. 25 26 27 1. First and Second Causes of Action: Violation of the PVPA and Request for Injunctive Relief Plaintiff‟s PVPA claim alleges that Defendant is marketing Sifra potatoes, a protected 28 variety, without the required PVPA notice and without the authority of Plaintiffs or HZPC. 3 1 Compl. at ¶ 26. Defendant argues that Plaintiff has no standing to enforce the PVPA against it. 2 See Doc. 9 at p. 10-13.2 Specifically, Defendant contends that HZPC, as the owner of the PVPA 3 certificate must bring suit. See Id. It is well settled “that before a federal court can consider the 4 merits of a legal claim, the person seeking to invoke the jurisdiction of the court must establish 5 the requisite standing to sue.” Whitmore v. Arkansas, 495 U.S. 149, 154 (1990). 6 A plaintiff bringing an infringement claim must meet both constitutional and prudential 7 standing requirements. The constitutional component of standing arises from the “case-or8 controversy requirement of Article III.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 9 (1992). In this context, Article III standing is satisfied by an ownership interest in the PVPA 10 certificate or exclusionary rights granted therefrom such that defendant‟s conduct has caused 11 plaintiff an injury in fact that a favorable judgment will redress. See WiAV Solutions LLC v. 12 Motorola, Inc., 631 F.3d 1257, 1265 (Fed. Cir. 2010); Morrow v. Microsoft Corp., 499 F.3d 13 1332, 1339 (Fed. Cir. 2007). Prudential standing, although similar to Article III standing, is born 14 of “judicially self-imposed limits on exercise of federal jurisdiction” and generally prohibits “a 15 litigant‟s raising another person‟s legal rights.” Elk Grove Unified School Dist. v. Newdow, 542 16 U.S. 1, 11-12 (2004). A Plaintiff has the burden “clearly to allege facts demonstrating it is a proper party to 17 18 invoke judicial resolution of the dispute.” U.S. v. Hays, 515 U.S. 737, 743 (1995). The standing 19 inquiry “often turns on the nature and source of the claim asserted.... Essentially, the standing 20 question in such cases is whether the constitutional or statutory provision on which the claim 21 rests properly can be understood as granting persons in the plaintiff's position a right to judicial 22 relief.” Warth v. Seldin, 422 U.S. 490, 500 (1975). Because the PVPA creates the right to sue 23 others for infringement of the rights of the owner of a plant variety, it also defines the nature and 24 source of the infringement claim and determines the party authorized to bring suit. 25 26 27 28 2 Federal Circuit law applies to the PVPA, substantive patent law, and procedural issues unique to patent law. Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300, 1304 (Fed. Cir. 2009) (citing Syngenta Seeds, Inc. v. Delta Cotton Coop., Inc., 457 F.3d 1269, 1273 (Fed. Cir. 2006) (specifically addressing PVPA)); Delta and Pine Land Co. v. Sinkers Corp., 177 F.3d 1343 (Fed. Cir. 1999); see AGSouth Genetics, LLC v. Georgia Farm Services, LLC, --F.Supp.2d. ----, 2014 WL 2112364, *4 (M.D. Ga. 2014) (applying Federal Circuit law to PVPA claim). This Court has identified no conflicts between Ninth Circuit law and Federal Circuit law as they apply to this case. 4 1 The PVPA provides “patent-like protection to novel varieties of sexually reproduced 2 plants (that is, plants grown from seed), which parallels the protection afforded asexually 3 reproduced plant varieties (that is, varieties reproduced by propagation or grafting) under … the 4 Patent Act.” Asgrow Seed Co. v. Winterboer, 513 U.S. 179 (1995). The PVPA is regularly 5 discussed in terms of patent law and the Federal Circuit applies patent law to fill in the gaps in 6 PVPA jurisprudence. See, e.g., Syngenta Seeds, Inc. v. Delta Cotton Co-op., Inc., 457 F.3d 1269, 7 1276 (Fed. Cir. 2006). Under the PVPA, “[a]n owner shall have remedy by civil action for 8 infringement of plant variety protection under section 2541….” 7 U.S.C. § 2561. Similarly, 9 section 2541 provides that it is “infringement of the right of the owner of a protected variety to” 10 sell, market or expose to sale, deliver, ship, consign, exchange, solicit an offer to buy or 11 otherwise transfer possession, import into or export from the United States, sexually multiply, or 12 propagate that protected variety without authority in the United States or in commerce regulable 13 by Congress. See 7 U.S.C. § 2541(a)(1-3). The requirement that the owner of a protected variety 14 be the party to seek redress an infringement under the PVPA is consistent with the most direct 15 analog to the PVPA – the Patent Act. Under the Patent Act, “[a] patentee [has a] a remedy by 16 civil action for infringement of his patent.” 35 U.S.C. § 281. 17 Under both the Patent Act and PVPA the owner of the patent or certificate has the right to 18 license, grant, or convey an exclusive right to use the patented object in the whole or any 19 specified part of the United States. See 7 U.S.C. 2531(b); 35 U.S.C. 261. A party is a patentee or 20 certificate owner for purposes of bringing an infringement suit “if it holds legal title to the patent 21 [or certificate], either by issuance or assignment.” Azure Networks, LLC v. CSR PLC, --- F.3d -22 --, 2014 WL 5741337, *3 (Fed. Cir. 2014) (citations omitted). A grant of exclusive license may 23 be tantamount to an assignment if all substantial rights are transferred to the licensee. Id. at *4; 24 A123 Sys., Inc. v. Hydro–Quebec, 626 F.3d 1213, 1218 (Fed.Cir.2010) (citations omitted); 25 Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 876 (Fed. Cir. 26 1991) (finding agreement amounted to an assignment, even though entitled “exclusive license,” 27 because it transferred substantial rights to licensee). 28 5 1 The Federal Circuit has recognized three categories of plaintiffs in analyzing 2 constitutional standing in a patent infringement context: those that can sue in their own name 3 alone; those that can sue as long as the patent owner is joined in the suit; and those that cannot 4 even participate as a party to an infringement suit. Morrow v. Microsoft Corp., 499 F.3d at 1339. 5 The first category consists of plaintiffs that hold all legal rights to the patent such as the patentee 6 or assignee of exclusionary rights and all or substantially all patent rights. Id. at 1340. A plaintiff 7 in the first category has constitutional and prudential standing to sue for infringement in its own 8 name. Id. at 1340 (citing Intellectual Prop. Dev., Inc. v. TCI Cablevision of California, Inc., 248 9 F.3d 1333, 1345 (Fed. Cir. 2001)). 10 The second category consists of plaintiffs that “hold exclusionary rights and interests 11 created by the patent statutes, but not all substantial rights to the patent.” Morrow at 1340. A 12 plaintiff in the second category would suffer an injury that grants constitutional standing when 13 the exclusionary rights are violated. However, the second category of plaintiff would lack 14 prudential standing to bring the suit on his own; his exclusionary rights must be enforced in the 15 name of the patent owner, and must join the patentee for the purpose of avoiding duplicative 16 litigation. Id. at 1340. 17 The third category of plaintiffs lacks exclusionary rights and therefore necessarily does 18 not possess substantial rights in the patent. Morrow, 499 F.3d at 1340-41. Because the third class 19 of plaintiffs does not possess exclusionary rights it is not injured by a party that makes, uses, or 20 sells the patented invention. Accordingly, the third category of plaintiffs lack constitutional 21 standing. Id. 22 In order to qualify as an exclusive licensee for purposes of constitutional standing, “a 23 party must have received, not only the right to practice the invention within a given territory, but 24 also the patentee's express or implied promise that others shall be excluded from practicing the 25 invention within that territory as well.” Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, 26 Inc., 620 F.3d 1305, 1317 (Fed. Cir. 2010) (citation omitted). A licensee need not hold all 27 exclusionary rights granted under a patent or certificate to be considered an exclusive licensee. 28 Id. at 1266. A licensee is an “exclusive licensee of a patent if it holds any of the exclusionary 6 1 rights that accompany the patent.” Id. at 1266 (emphasis added). However, “an exclusive 2 licensee derives its standing from the exclusionary rights it holds,” therefore its standing is 3 “coterminous with those rights.” Id. At 1266. Accordingly, an exclusive licensee has 4 constitutional standing if it can exclude the particular defendant from the specific protected use 5 granted by the patent or certificate that was allegedly infringed upon. See WiAV Solutions, 631 6 F.3d at 1267 (For constitutional standing a plaintiff must show “that is has the right under the 7 patents to exclude the Defendants from engaging in the alleged infringing activity and therefore 8 is injured by Defendants‟ conduct.”)(emphasis original). As to exclusionary rights, Plaintiffs allege that the Agreement gave Zuckerman “the 9 10 exclusive right to use and market Sifra seed potatoes in California, Oregon[,] and Washington.” 11 Compl. at ¶ 14. The Agreement is not so explicit. Rather, the Agreement authorizes Zuckerman 12 to “certify [Sifra] seed potatoes … for its own use” and gives it the “Priority Right for marketing 13 and sales of [Sifra] seed potatoes … in California, Oregon, and Washington.” Sifra Production 14 Agreement at § E. The agreement defines “Priority Right … as the right of [Zuckerman] to first 15 right of refusal to use or market [Sifra] seed in California, Oregon, and Washington.” Id. at § E.3 16 HZPC agreed not to appoint other marketing agents in California, Oregon, or Washington but 17 retained its own ability to sell seed potatoes in California, Oregon, and Washington.4 See Id. at § 18 H (“the parties shall meet and/or exchange information … set[ting] forth the amount of [Sifra] 19 seed potatoes … sold by HZPC to other purchasers in California, Oregon and Washington.”). 20 The Sifra Production Agreement gives Zuckerman the exclusive right to market (and to 21 propagate for the purpose of marketing for non-table use) Sifra to other growers in the territory 22 to the exclusion of all but HZPC. That right is an exclusionary right granted under the PVPA. 23 See 7 U.S.C. § 2541(a)(3) (It is infringement to “propagate … the variety as a step in marketing 24 25 26 27 28 3 HZPC also granted Zuckerman “the nonexclusive right to market” elsewhere in the United States and Latin America, tending to indicate that the California, Oregon, and Washington marketing agreement was designed to be exclusive. 4 Despite HZPC‟s retention of the right to sell seed potatoes in California, Oregon, and Washington, exclusivity for purposes of standing does not require the license to be exclusive as to the licensor, but rather that the licensor has promised not to grant additional rights to third parties. See Amgen, Inc. v. Chugai Pharmaceutical Co. Ltd., 808 F.Supp. 894, 900 (D.Mass. 1992) aff‟d, 52 F.3d 1026 (Fed. Cir. 1995); Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1552 (Fed.Cir. 1995). 7 1 (for growing purposes)” without authority.) However, Plaintiffs do not allege that Defendant has 2 propagated Sifra as a step in marketing for growing purposes. See Compl. at ¶ 26 (“Bidart is 3 marketing, conditioning, offering for sale, exposing for sale, stocking the variety for sale, 4 exporting from the United States and selling Sifra potatoes” without authority.); Doc. 4-1 at 5-6. 5 Accordingly, that exclusive right does not provide Plaintiffs constitutional standing because it is 6 not alleged to have been infringed upon.5 7 Zuckerman holds the right to sell Sifra to buyers within California, Oregon, and 8 Washington with the condition that if Zuckerman declines to do so that HZPC may sell Sifra to 9 buyers in the same area. 6 As Plaintiff notes, “HZPC must pay royalties to Zuckerman if (after 10 Zuckerman has declined to do so) HZPC makes any sale of Sifra within the Exclusive Territory.” 11 Doc. 10 at 2. Accordingly, Zuckerman and HZPC both have inclusive rights, i.e., the right to 12 authorize other producers to sell Sifra for table use. See Compl. at ¶ 30 (“Neither of the Plaintiffs 13 nor HZPC have granted permission to Bidart to propagate, develop, market or sell Sifra 14 potatoes.”). However, neither – standing alone – has the right to exclude others from table 15 production of Sifra within California, Oregon, and Washington; Zuckerman may sell Sifra for 16 production purposes without further consent by HZPC and if Zuckerman declines to exercise its 17 right of first refusal to sell Sifra seed, HZPC may sell Sifra seed to growers within California, 18 Oregon, and Washington. Zuckerman has no authority to prevent others from growing of Sifra 19 for table use (among other protected uses) if authorized by HZPC. In order to exclude a potential 20 grower from growing or selling Sifra for table use in the territory, first Zuckerman, then HZPC 21 must refuse permission. Accordingly, Zuckerman and HZPC are best described as co-exclusive 22 holders of the rights granted by the PVPA certificate for Sifra because –as a result of 23 Zuckerman‟s right of first refusal – neither entity can exclude a third party from selling, 24 25 5 A claim under this exclusive right may have been actionable had Zuckerman alleged a claim against a third party 26 that sold Sifra seed in California, Oregon, or Washington to Bidart for propagation or if Bidart was alleged to have 27 28 propagated Sifra seed for marketing to a third party for purposes of growing. Neither allegation is before this Court. 6 It is of note that HZPC was the entity that sent Defendant a cease and desist letter informing Defendant that “HZPC is the owner of the variety and … to sell … [Sifra] was an infringement of HZPC‟s plant breeder‟s rights.” Declaration of Fred Koops, Doc. 4-3 at ¶ 15. Although not dispositive, that letter is indicative of HZPC‟s belief that it had not granted Plaintiffs property rights in the PVPA certificate. 8 1 marketing, importing, etc., Sifra without the other.7 Zuckerman, standing alone, does not have 2 constitutional standing to bring its first cause of action. 3 Accordingly, Plaintiffs are not likely to succeed on the merits of their first claim. 4 2. Third Cause of Action: Violation of the Lanham Act 5 Plaintiff next asserts a claim for unfair competition under Lanham Act § 43(a), 15 U.S.C. 6 § 1125(a), and requests injunctive relief pursuant to 15 U.S.C. § 1116. The Supreme Court 7 recently noted that Section 43(a) of the Lanham Act “creates two distinct bases of liability: false 8 association, § 1125(a)(1)(A), and false advertising, § 1125(a)(1)(B).” Lexmark Intern., Inc. v. 9 Static Control Components, Inc., --- U.S. ---, 134 S.Ct. 1377, 1384 (2014) (citing Waits v. Frito– 10 Lay, Inc., 978 F.2d 1093, 1108 (9th Cir. 1992), and abrogating it on other grounds). The Waits 11 Court noted that Section 43(a) creates liability for “(1) false representations concerning the 12 origin, association, or endorsement of goods or services through the wrongful use of another's 13 distinctive mark, name, trade dress, or other device („false association‟), and (2) false 14 representations in advertising concerning the qualities of goods or services („false advertising‟).” 15 978 F.2d at 1108 (citations omitted); see also 4 J. Thomas McCarthy, McCarthy on Trademarks 16 and Unfair Competition § 27:10, at 27-19 to 27-20 (4th ed.1998) (Section 1125(a)(1) is divided 17 into two subsections: subsection A “relates to use of the statute as a vehicle for federal court 18 assertion of unregistered trademark, trade name and trade dress infringement claims;” subsection 19 B “relates to use of the statute as a vehicle for assertion in federal court of false advertising (as 20 well as trade libel) claims.”). 21 It is not clear from the Complaint or motion for preliminary injunction whether Plaintiffs 22 seek to allege a “false association” claim under § 43(a)(1)(A) or a “false advertising” claim 23 under § 43(a)(1)(B). In Plaintiffs‟ complaint they allege that “any sale of Sifra …within 24 [California, Oregon, or Washington] carries with it the implied representation that the Sifra 25 potatoes came from Plaintiffs….” “[S]ales by Bidart of Sifra are likely to cause confusion, to 26 27 28 7 HZPC has claimed the right to exclude others from selling the variety but has noted that “HZPC … allows Zuckerman … to produce, market, sell, buy, deliver and import the potato variety Sifra in California.” Doc. 4-3 at 23. Based on the Sifra Production Agreement, HZPC appears to be incorrect. The conflict between HZPC and Zuckerman as to which entity holds exclusive rights highlights the need for both parties to be named plaintiffs to the infringement action. 9 1 cause mistake, or to deceive consumers as to the affiliation between Plaintiffs and Bidard or as to 2 the origin, sponsorship or approval [of] Bidart‟s sale of Sifra potatoes.” Compl. at ¶¶ 42-43. The 3 “cause confusion, or to cause mistake, or to deceive consumers as to the affiliation” language in 4 the Complaint mirrors the false association claim created by § 43(a)(1)(A). See 15 U.S.C. § 5 1125(a)(1)(A). However, in their motion for preliminary injunction Plaintiffs allege that 6 Defendant, by “marketing the Sifra variety without representing its true nature and that it is 7 subject to protection under the PVPA,” has caused and continues to cause harm to Plaintiffs‟ 8 Bella Blanca® brand and to the reputation of the variety. Doc. 4-1 at 6; see Doc. 10 at 4. 9 Plaintiffs‟ motion for preliminary injunction further contends that Defendant‟s marketing without 10 designation of the potatoes as Sifra “misrepresent[ed] the nature, source, and characteristics of 11 the product.” Doc. 10 at 4.8 This claim appears to allege a false advertising claim because its 12 language mirrors § 43(a)(1)(B). See 1125(a)(1)(B). This Court will consider whether either of Plaintiffs‟ contentions – (1) that because 13 14 Defendant sold Sifra and Plaintiff was the sole producer that Defendants sought to convey an 15 implication of approval by Plaintiffs of Defendant‟s production that caused consumers to 16 perceive an affiliation between Plaintiffs and Defendant to the detriment of Plaintiff‟s brand (due 17 to allegedly lesser quality production by Defendant), or (2) that Defendant‟s failure to disclose 18 that it was selling Sifra constituted false advertising in violation of the Lanham Act to the 19 detriment of Plaintiff‟s brand (presumably because the uniqueness of the brand in the territory 20 was destroyed) – would be likely to succeed on the merits. 21 a. False Association A false association claim is available where defendants' conduct has allegedly created “a 22 23 likelihood of confusion as to whether plaintiffs were endorsing [defendant‟s] product.” Wendt v. 24 Host Int'l, Inc., 125 F.3d 806, 812 (9th Cir. 1997). Plaintiff‟s false association claim is predicated 25 on an assumption that Plaintiffs are (and have the right to be) exclusive producers of Sifra in the 26 27 28 8 In responding to Defendant‟s motion to dismiss, Plaintiffs note that their claim is not a trademark claim as though that distinction defeats Defendant‟s argument. See Doc. 10 at 4. Plaintiffs distinction provides limited guidance to the Court in evaluating their claim because Plaintiffs appear to allege violations of the false association and false advertising provisions of § 43(a)(1), either of which can be entirely independent of trademark law. 10 1 territory. See Compl. at ¶ 42 (any sale of Sifra carries the implied representation that the potatoes 2 come from Plaintiffs…). As explained supra, Plaintiffs have not shown that they possess the 3 exclusive right to sell Sifra for table use. Further, Plaintiffs do not explain how “sales by Bidart of Sifra are likely to cause 4 5 confusion … or to deceive consumers as to the affiliation between” Defendant and Plaintiffs 6 considering Bidart is not alleged to have used any word, term, name, symbol, or device or any 7 combination thereof, attributable to Plaintiffs. The Court must assume that Plaintiffs seek to 8 imply that the Sifra potatoes are distinctive enough to be recognizable from other white, round 9 potatoes such that Plaintiffs could allege a trade dress claim. Assuming, arguendo, that such a 10 claim is actionable, Plaintiffs have pled no facts and submitted no evidence to suggest that Sifra 11 is so visually distinguishable from other potatoes (and that the visual distinctness is non12 functional) that a trade dress claim would be viable in this case. See Disc Golf Ass‟n v. 13 Champion Discs, Inc., 158 F.3d 1002, 1006 (9th Cir. 1998); see also TrafFix Devices, Inc. v. 14 Mktg. Displays, Inc., 532 U.S. 23, 33 (2001) (Trade dress is functional if it is essential to the use 15 or purpose of the article or if it affects the cost or quality.) 16 Plaintiffs appear to have attempted force an infringement claim into the framework of a 17 false association claim. “This is evident from the relief sought, i.e. to enjoin Defendant‟s sale of 18 the Sifra variety without authorization.” Doc. 10 at 4; see Compl. at ¶ “61”.9 That remedy is 19 consistent with a claim for patent infringement, not false association. The facts of this action do 20 not support a claim for false association. 21 b. False Advertising 22 The five elements of a false advertising claim under Section 43(a) of the Lanham Act are: 23 (1) a false statement of fact by the defendant in a commercial advertisement about its own or another's product; 24 25 (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; 26 27 28 9 Paragraph 61 of the Complaint falls between paragraphs 44 and 45. 11 (3) the deception is material, in that it is likely to influence the purchasing decision; 1 2 (4) the defendant caused its false statement to enter interstate commerce; and 3 (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products. 4 5 Skydive Arizona, Inc. v. Quattrocchi, 673 F.3d 1105, 1110 (9th Cir.2012). The thrust of 6 7 8 9 10 11 12 Plaintiffs‟ false advertisement claim is that Plaintiffs to have the right to exclude others from the production and sale of Sifra in the territory and that by Defendant selling Sifra potatoes under any name other than “Sifra” or Plantiffs‟ “Bella Blanca” mark Defendant has deprived Plaintiffs of their right to advertise exclusivity of production and command a premium. This theory is intimately tied to Plaintiffs‟ PVPA claim; it requires Plaintiffs‟ ability to exclude third parties from production of Sifra. Plaintiffs‟ right to exclude others has not been established. Even if Plaintiffs could establish a right to exclude others from production the facts 13 14 15 16 17 18 19 20 21 22 23 presented to not lend themselves to a false advertising claim. The substance of Plaintiffs‟ claim alleges that Defendant‟s failure to disclose that the potatoes that it sold were Sifra stock was “false and misleading.” In order to establish that an advertisement is false or misleading under the Lanham Act, a plaintiff must show that the statements were either literally false or implicitly conveyed a false impression. Cashmere & Camel Hair Mfrs. Institute v. Saks Fifth Ave., 284 F.3d 302 (1st Cir. 2002), cert. denied, 123 S.Ct. 485 (U.S. 2002). Defendant contended (and Plaintiff has not disputed) that it advertised the potatoes that it sold as “white, round potatoes.” Doc. 9 at 14. That description is literally true and Plaintiff has not explained how that description conveys any false impression regarding the potatoes origin10, sponsorship, or approval. Plaintiffs have cited to (and the Courts own research has yielded) no authority to suggest that a grower or 24 25 10 Plaintiffs‟ allegations cannot support a claim for false impression regarding origin of the potatoes that Defendant 26 is alleged to have grown. The “origin of goods” language in § 43(a)(1)(A) “refers to the producer of the tangible 27 28 goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods.” Dastar Corp. v. Twentieth Century Fox, Film. Corp., 539 U.S. 23, 37 (2003). Plaintiffs allege that Defendant actually grows the Sifra potatoes that it sells. Defendant failing to disclose in its advertising that HZPC has an interest in the PVPA certificate is not a misrepresentation of origin protectable under the Lanham Act. If Defendant grew the potatoes for sale and represented them as such then it has not misrepresented their origin. 12 1 seller must use in its advertisement the specific varietal that it grows or that a failure to do so is 2 false or misleading.11 3 Plaintiffs‟ Lanham Act claims are unlikely to succeed on the merits. 4 3. Fourth Cause of Action: Unfair Competition 5 Plaintiffs have alleged that Defendant engaged in conduct that constitutes unlawful, 6 unfair, and/or fraudulent business practices in violation of California Business & Processions 7 Code Section 17200. Compl. at ¶¶45-48. California's unfair competition law (“UCL”) prohibits businesses from engaging in “any 8 9 unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading 10 advertising.” Cal. Bus. Prof.Code § 17200. Accordingly, “an act can be alleged to violate any or 11 all of the three prongs of the UCL–unlawful, unfair, or fraudulent.” Berryman v. Merit Prop. 12 Mgmt., Inc., 152 Cal.App. 4th 1544, 1554 (2007). Plaintiffs note that California Business & 13 Professions Code Section 17200 “borrows” violations of other laws and treats them as unlawful 14 practices independently actionable under the Unfair Competition Act. Doc. 4-1 at 6 (citing 15 Farmers Ins. Exchange v. Superior Court, 2 Cal.4th 377, 384 (1992)); Cel-Tech Cmmc‟ns, Inc. v. 16 Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 180 (1999). An “unlawful” business act 17 actionable under the UCL is any business practice that is prohibited by law, whether “civil or 18 criminal, statutory or judicially made ... federal, state or local.” McKell v. Washtington Mut., 19 Inc., 142 Cal.App.4th 1457, 1474 (2006) (citations omitted). Plaintiffs‟ complaint does not made clear what “wrongful acts and conduct” trigger UCL 20 21 liability. Rather, the complaint generally alleges that all of the prior conduct alleged violates the 22 UCL. See Compl. at ¶¶ 45-46. Plaintiffs motion for preliminary injunction relies exclusively on 23 the alleged PVPA violation as the predicate unlawful business act. Because Plaintiffs lack 24 standing to bring the PVPA claim they similarly cannot succeed on the UCL claim. See Bebe Au 25 Lait, LLC v. Mothers Lounge, LLC, 2014 WL 4744758, *4 (N.D. Cal. 2014). 26 27 28 11 Plaintiffs‟ real complaint does not appear to be that Defendant mislabeled Sifra potatoes but that it grew and sold them at all. That claim does not lend itself cleanly to resolution through the Lanham Act. 13 1 Additionally, to the extent that Plaintiffs rely on the PVPA or Lanham Act violations to 2 establish the predicate unlawful conduct, Plaintiffs face preemption. A UCL claim based on 3 patent infringement is preempted by federal intellectual property law. See Summit Mach. Tool 4 Mfg. Corp. v. Victor CNC Sys., Inc., 7 F.3d 1434, 1442 (9th Cir. 1993). “Preemption analysis 5 involves determining whether the state law claim contains an element not shared by the federal 6 law ....“ Id. at 1439. In Summit, the Ninth Circuit held that a UCL claim based on a competitor's 7 “pirating” of its lathe design was preempted by federal patent and copyright laws because the 8 claim did not contain an additional element beyond that of a federal patent or copyright 9 infringement claim. See id. at 1439, 1442. Thus, to the extent Plaintiffs base their UCL claim 10 solely on PVPA certificate infringement, the claim would be preempted because it is wholly 11 congruent with federal intellectual property law. See Deckers Outdoor Corp. v. J.C. Penney Co. 12 Inc., 2014 WL 4425883, *6 (C.D. Cal. 2014); Medina v. Microsoft Corp., 2014 WL 2194825, *3 13 (N.D. Cal. 2014); In re Netflix Antitrust Litigation, 506 F.Supp.2d 308, 319–20 (N.D. Cal. 14 2007). Plaintiffs cannot claim standing and are unlikely to succeed on the merits on their UCL 15 claims based solely on the alleged PVPA certificate infringement or the alleged Lanham Act 16 violations. 17 /// 18 /// 19 /// 20 C. Plaintiffs are Not Entitled to a Preliminary Injunction 21 Because Plaintiffs have failed to demonstrate that they are likely to succeed on the merits the 22 Court need not address the remaining considerations for granting a preliminary injunction. 23 Plaintiffs‟ motion for preliminary injunction will be denied. 24 25 26 IV. MOTION TO DISMISS PURSUANT TO RULE 12(b)(6) A. Legal Standard A complaint may be dismissed under Rule 12(b)(6) of the Federal Rules of Civil 27 Procedure if it appears beyond doubt that a plaintiff can prove no set of facts in support of the 28 claim that would entitle her to relief. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); 14 1 Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990). To survive a motion 2 to dismiss, “[f]actual allegations must be enough to raise a right to relief above the speculative 3 level, on the assumption that all allegations in the complaint are true even if doubtful in fact.” 4 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). “[T]he tenet that 5 a court must accept a complaint's allegations as true is inapplicable to threadbare recitals of a 6 cause of action's elements, supported by mere conclusory statements.” Ashcroft v. Iqbal, 556 7 U.S. 662, 663 (2009) (citations omitted). A complaint must contain sufficient factual matter, 8 accepted as true, to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678. A 9 claim has facial plausibility when the plaintiff pleads factual content that allows the court to 10 draw the reasonable inference that the defendant is liable for the alleged misconduct. Iqbal, 556 11 U.S. at 663. 12 When deciding a motion to dismiss, the Court is generally limited to reviewing the 13 complaint, and all allegations of material fact therein are taken as true and construed in the light 14 most favorable to the plaintiff. Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 15 1981). However, the Ninth Circuit allows application of “the „incorporation by reference‟ 16 doctrine, which permits [the Court] to take into account documents whose contents are alleged in 17 a complaint and whose authenticity no party questions.” Knievel v. ESPN, 393 F.3d 1068, 1076 18 (9th Cir. 2005). Additionally, under Federal Rule of Evidence 201, a court may take judicial 19 notice of matters of public record. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 20 2001); see Daniels-Hall v. National Educ. Ass‟n, 629 F.3d 992, 998 (9th Cir. 2010). Moreover, 21 judicial notice may be taken of a fact to show that a complaint does not state a cause of action. 22 Sears, Roebuck & Co. v. Metropolitan Engravers, Ltd., 245 F.2d 67, 70 (9th Cir. 1956); see 23 Estate of Blue v. County of Los Angeles, 120 F.3d 982, 984 (9th Cir. 1997). Although the court 24 may not consider a memorandum in opposition to a defendant's motion to dismiss to determine 25 the propriety of a Rule 12(b)(6) motion, see Schneider v. Cal. Dep't of Corr., 151 F.3d 1194, 26 1197 n. 1 (9th Cir.1998), it may consider allegations raised in opposition papers in deciding 27 whether to grant leave to amend, see, e.g., Broam v. Bogan, 320 F.3d 1023, 1026 n. 2 (9th Cir. 28 2003). 15 1 “A district court should grant leave to amend even if no request to amend the pleading 2 was made, unless it determines that the pleading could not possibly be cured by the allegation of 3 other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). “Dismissal with prejudice 4 and without leave to amend is not appropriate unless it is clear . . . that the complaint could not 5 be saved by amendment.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 6 2003). In other words, leave to amend need not be granted only when amendment would be 7 futile. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002). 8 9 B. Discussion In considering Defendant‟s motion to dismiss, this Court only looks to the complaint and 10 documents incorporated by reference therein: the Sifra Production Agreement and the Sifra 11 PVPA certificate. This Court recognizes that it has the authority to consider declarations and 12 moving papers in considering whether to grant leave to amend. 13 1. First Cause of Action: Plant Variety Protection Act 14 As discussed in Section III(B)(1), supra, Plaintiffs the Sifra Production agreement does 15 not grant Zuckerman the exclusive right to grow or sell Sifra table stock. See Agreement at § E 16 (Zuckerman has the “first right of refusal to use or market seed of the variety….”). Without the 17 right to exclude Defendant from producing or selling Sifra, Zuckerman has suffered no 18 constitutional injury that would grant it standing. Plaintiffs have not pled any facts to suggest that 19 Bella Brands, LLC has any exclusionary rights or interest in PVPA certificate that would grant it 20 standing. Accordingly, Plaintiffs‟ first and second causes of action will be dismissed. 21 Fred Koops, General Manager of HZPC Americas Corp., has indicated that HZPC sent 22 letters to Bidart advising it that HZPC owns the PVPA certificate for Sifra and that Bidart may 23 not deal with Sifra without an agreement in writing from HZPC. Doc. 4-3 at ¶ 15, p. 20. The 24 second of those letters claims that “HZPC has the right, during the term of the plant variety 25 protection to exclude others from selling the variety….” Similarly, Zuckerman has alleged that it 26 has exclusive rights to enforce any PVPA violation regarding Sifra within California, 27 Washington, and Oregon. Based on the Sifra Production agreement and declarations submitted to 28 this Court, it appears that giving Zuckerman the opportunity to amend to join HZPC as a plaintiff 16 1 will result in both having standing to bring a claim for infringement of the rights granted by the 2 PVPA. Because joinder of an additional party to establish standing does not appear to be futile, 3 Zuckerman will be granted leave to amend in order to join HZPC as a plaintiff. 4 2. Third Cause of Action: Lanham Act 5 Plaintiffs‟ third cause of action is based in part on the assumption that Plaintiffs have the 6 right to exclude others from marketing Sifra in California, Oregon, or Washington. For that 7 reason this claim cannot succeed. Contrary to Plaintiffs‟ assertion, Defendant marketing Sifra 8 (regardless of whether it is labeled as such)12 does not imply that Zuckerman has approved of 9 Bidart‟s sale of Sifra. Even assuming that a trade dress or other false association claim could be 10 alleged in this case based solely on sale of Sifra, Defendant‟s sale of Sifra could only imply that 11 Zuckerman or HZPC has approved of the sale. 12 Further, it is unclear under which subsection of § 43(a) Plaintiff is proceeding. The Ninth 13 Circuit has held that the different causes of action in the different subsections under the Lanham 14 Act have different standing requirements. Jack Russell Terrier Network of Northern Cal. v. 15 American Kennel Club, Inc., 407 F.3d 1027, 1037 (9th Cir.2005) (citations omitted). For 16 example, for standing pursuant to the “false advertising” prong of § 43(a) of the Lanham Act, 15 17 U.S.C. § 1125(a)(1)(B), a plaintiff must show: (1) a commercial injury based upon a 18 misrepresentation about a product; and (2) that the injury is “competitive,” or harmful to the 19 plaintiff's ability to compete with the defendant. Id. (citations omitted). Whereas under the “false 20 association” prong of § 43 of the Lanham Act, 15 U.S.C. § 1125(a) (1)(A), a plaintiff can satisfy 21 the standing requirement merely by alleging commercial injury based upon the deceptive use of a 22 trademark or its equivalent. Id. Although this Court attempted to infer from Plaintiffs‟ moving 23 papers their intent for the Lanham Act claims, this Court is restricted to the Complaint and 24 documents incorporated by reference in ruling on a motion to dismiss. Plaintiffs have not pled 25 adequate factual matter in its complaint for this Court to make a determination as to standing, 26 much less whether Plaintiffs can state a claim. 27 28 12 Defendant is not alleged to have used any mark or designation to associate itself with Plaintiffs. 17 At minimum, in order for Plaintiffs‟ Lanham Act – false association – cause of action to 1 2 state a claim, Plaintiffs would have to allege the specific false or misleading description or 3 representation of fact by Defendant and explain how it is likely to cause confusion as to 4 affiliation, connection or association with Plaintiff. 13 Similarly, in order for Plaintiffs‟ Lanham Act – false advertising – cause of action to state 5 6 a claim Plaintiffs, at minimum, would have to allege: (1) what false representation Defendant 7 made that encouraged consumers to purchase its product rather than Plaintiffs‟ product. See 8 TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 825 (9th Cir. 2011). From Plaintiffs‟ 9 complaint, it appears that Plaintiffs contend that Defendant has been able to divert sales from 10 Plaintiffs because Defendant “is selling Sifra potatoes at a substantially lower price than 11 Plaintiffs.” Compl. at ¶ 26. Plaintiff has plead nothing that would tend to indicate that Defendant 12 advertising Sifra as “white, round potatoes” or the omission of the name “Sifra” or any other 13 alleged misrepresentation (rather than simply selling Sifra at a lower price) has caused 14 consumers to purchase from Defendant rather than Plaintiff. 15 Because Plaintiffs failed to adequately plead a claim for false association or false 16 advertising under 15 U.S.C. § 1125(a), as described here and in Section III(B)(2), supra, their 17 claim will be dismissed. Although it is not immediately clear how Plaintiffs could cure the 18 defects in this claim due to the lack of clarity in the Complaint, the Court cannot determine that 19 amendment of this claim would be futile. Plaintiffs will be granted a single opportunity to amend 20 this cause of action. 21 3. Fourth Cause of Action: Unfair Competition 22 As explained in Section III(B)(3), supra, to the extent that Plaintiffs‟ UCL claim is based 23 on a violation of the PVPA it is preempted by federal law. This Court can glean no other UCL 24 13 Plaintiffs are directed to identify the specific misrepresentation contained in Defendant‟s advertising. Plaintiffs are 25 further cautioned that any Lanham Act claim that sounds in fraud will be subject to the increased pleading standards of Rule 9(b). See, e.g., Architectural Mailboxes, LLC v. Epoch Design, LLC, 2011 WL 1630809, *5 (S.D. Cal. 26 2011) (collecting cases); Ecodisc Tech. AG v. DVD Format/Logo Licensing Corp., 711 F.Supp.2d 1074, 1085 (C.D. 27 28 Cal.2010); Sw. Windpower, Inc. v. Imperial Elec., Inc., 2011 WL 486089, *4 (D. Ariz. 2011) (applying Rule 9(b) to plaintiff's Lanham Act claim that was “grounded in fraud” where the complaint alleged “false or misleading descriptions and representations of fact” made in “bad faith”); Pestube Sys., Inc. v. HomeTeam Pest Def., LLC, 2006 WL 1441014, at *4–5 (D. Ariz. 2006) (applying Rule 9(b) to plaintiff's Lanham Act claim that was “grounded” or “sounding” in fraud when the complaint alleged “knowing” misrepresentations). 18 1 violation from Plaintiffs‟ threadbare recitation of elements. However, due to the extreme breadth 2 of the UCL and the lack of clear factual allegations in Plaintiffs‟ Complaint, this Court cannot 3 conclude that amendment would be futile. See Sybersound Records, Inc. v. UAV Corp., 517 4 F.3d 1137, 1152 (9th Cir. 2008) (“California‟s statutory unfair competition laws broadly prohibit 5 unlawful, unfair, and fraudulent business acts.”) Plaintiffs will be granted a single opportunity to 6 amend as to this cause of action. 7 V. ORDER 8 Based on the foregoing, IT IS HEREBY ORDERED that: 9 1. Plaintiffs‟ motion for preliminary injunction (Doc. 4) is DENIED; 10 2. Defendant‟s motion to dismiss (Doc. 8) is GRANTED as follows: 11 12 13 14 15 16 17 a. Plaintiffs‟ first and second causes of action for violation of the PVPA are DISMISSED with leave to amend; b. Plaintiffs‟ third cause of action for violation of the Lanham Act is DISMISSED with leave to amend; c. Plantiffs‟ fourth cause of action for violation of the California Business and Professions Code Section 17200, et seq. is DISMISSED with leave to amend; 3. Any amended complaint must be filed within 60 days of the date of this order. 18 19 IT IS SO ORDERED. 20 Dated: December 17, 2014 SENIOR DISTRICT JUDGE 21 22 23 24 25 26 27 28 19

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