Gonzales v. Trimedica International, Inc.

Filing 28

ORDER signed by Judge John A. Mendez on 11/30/10 ORDERING that dft's 9 , 10 Motions to Dismiss are DENIED. (Benson, A.)

Gonzales v. Trimedica International, Inc.

Doc. 28

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. FACTUAL AND PROCEDURAL BACKGROUND TRIMEDICA INTERNATIONAL, INC.; and DOES 1-100, Inclusive Defendants. v. MICHAEL GONZALES, Plaintiff, ) ) ) ) ) ) ) ) ) ) ) ) Case No. 2:10-CV-1360 JAM-DAD ORDER DENYING DEFENDANTS MOTION TO DISMISS UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

This matter comes before the Court on Defendant Trimedica International, Inc.s ("Defendant") Motions to Dismiss (Doc. 9

& Doc. 10) the Complaint (Doc. 1) filed by Plaintiff Michael Gonzales ("Plaintiff"). Plaintiff opposes the motion.1

Plaintiff alleges that he is a California citizen who believes in the importance of a fair and competitive market for the manufacture, marketing, sale, and distribution of consumer
1

This motion was determined to be suitable for decision without oral argument. E.D.Cal. L.R. 230(g). The hearing was scheduled for September 15, 2010. 1
Dockets.Justia.com

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products.

Complaint ¶ 7.

Plaintiff alleges that Defendant is

falsely claiming that "AlkaMAX Alkaline Booster" ("AlkaMAX"), a purported pH balancing formula dietary supplement, is patented. Defendant allegedly advertises that AlkaMAX is the "only patented, doctor-recommended pH balancing formula on the market." Complaint ¶ 1. Defendant allegedly marks each box of

AlkaMAX as patented and every retailer on the internet allegedly claims that AlkaMAX is patented. Complaint ¶ 17. Plaintiff He

avers that AlkaMAX is not, and has never been patented.

claims he exhaustively researched public records, including the records of the United States Patent & Trademark office and has confirmed that AlkaMAX is not patented. Id.

Plaintiff alleges that Defendant engaged in this false marking scheme to deceive the public, stifle legitimate competition, and gain a competitive advantage in the market. Complaint ¶ 19. Plaintiff brings this suit to act in the public interest under 35 U.S.C. § 292, a false marking statute.

II. A. Legal Standard 1.

OPINION

Motions to Dismiss a. 12(b)(1)

The Article III case or controversy requirement limits federal courts' subject matter jurisdiction by requiring that plaintiffs have standing. (1984). Allen v. Wright, 468 U.S. 737, 750

The party asserting federal subject matter jurisdiction Kokkonen v. Guardian

bears the burden of proving its existence. 2

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Life Insurance Co., 511 U.S. 375, 377 (1994). Standing addresses whether the plaintiff is the proper party to bring the matter to the court for adjudication. Chandler v. State Farm Mutual

Automobile Insurance Co., 598 F.3d 1115, 1122 (9th Cir. 2010). Because standing pertains to federal courts subject matter jurisdiction, it is properly raised in a 12(b)(1) motion to dismiss. White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). b. 12(b)(6) A party may move to dismiss an action for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). In considering a motion to

dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1975),

overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). Assertions that

are mere "legal conclusions," however, are not entitled to the assumption of truth. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950

(2009), citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). To survive a motion to dismiss, a plaintiff needs to

plead "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. Dismissal is

appropriate where the plaintiff fails to state a claim supportable by a cognizable legal theory. Balistreri v.

Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990) . Upon granting a motion to dismiss for failure to state a claim, the court has discretion to allow leave to amend the complaint pursuant to Federal Rule of Civil Procedure 15(a). 3

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"Dismissal with prejudice and without leave to amend is not appropriate unless it is clear . . . that the complaint could not be saved by amendment." Eminence Capital, L.L.C. v. Aspeon,

Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). B. Claims for Relief 1. Standing

Defendant argues that the Complaint should be dismissed for lack of standing because Plaintiff has not established the three basic standing requirements: injury in fact, causation, and redressibility. Plaintiff counters that he has standing because

this is a qui tam action and he is acting as a relator to enforce 35 U.S.C. § 292, which confers upon any person the right to sue for civil monetary penalties, restitution, and injunctive relief for false patent marking. Standing is a threshold issue. Every plaintiff must demonstrate standing, a jurisdictional prerequisite under Article III's case-or-controversy requirement. Vermont Agency

of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 771 (2000). Thus, a plaintiff must show (1) that he has

suffered an "injury in fact," an invasion of a legally protected interest that is "(a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical," (2) that there is "a causal connection between the injury and the conduct complained of," and (3) that the injury is likely to be redressed by a favorable decision. Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560-61 (1992) (citations and quotations marks omitted). Section 292(b) is a qui tam provision, i.e., a "statute 4

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author[izing] a private person, known alternatively as a ,,relator or ,,informer, to bring suit on behalf of the government and to share in the financial recovery." San

Francisco Technology, Inc. v. Glad Products Comp., No. 10-CV-00966, 2010 WL 2943537 *2 N.3 (N.D.Cal. 2010) (internal citations omitted). The Supreme Court has repeatedly treated See Vermont Agency, 529

Section 292(b) as a qui tam statue.

U.S. at 768 n. 1 (listing section 292(b) as one of four qui tam statutes currently in force). A qui tam plaintiff, or relator, can establish standing based on the United States' implicit partial assignment of its damages. Vermont Agency, 529 U.S. at 773-74. In other words,

even though a relator may suffer no injury himself, a qui tam provision operates as a statutory assignment of the United States' rights, and "the assignee of a claim has standing to assert the injury in fact suffered by the assignor." Id.

Congress has, by enacting Section 292, defined an injury in fact to the United States. "In passing the statute prohibiting

deceptive patent mismarking, Congress determined that such conduct is harmful and should be prohibited." Stauffer v.

Brooks Brothers, Inc., Nos. 2009-1429, 2009-1430, 2009-1453, 2010 WL 3397419 *4 (Fed. Cir. 2010). Because the government

would have standing to enforce its own law, Plaintiff, as the government's assignee, also has standing to enforce Section 292. Defendants argument that since Plaintiff has not purchased AlkaMAX he lacks standing is unpersuasive since the statute is clear that "any person" has standing and Plaintiff is pursuing this lawsuit to enforce the laws of the United States. 5

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Accordingly, Defendants motion to dismiss based on standing grounds is DENIED. 2. Statement of a Claim Defendants other Motion to Dismiss contends that Plaintiffs Complaint fails to state a claim upon which relief can be granted. Defendant avers that the false marking claim

involves fraud so it must be pled with particularity in accordance with Rule 9(b). Furthermore, Defendant argues that

Plaintiff does not allege enough facts to plead the "intent to deceive" element of the false marking claim. Plaintiff argues

that while he does not need to satisfy a heightened pleading standard, the Complaint nonetheless complies with Rule 9(b)s requirements and that he properly alleges sufficient facts for his "intent to deceive" claim. (a) Pleading Standard

To state a false marking claim, the plaintiff must allege the following: (1) a marking importing that an object is patented; (2) falsely affixed to; (3) an unpatented article; (4) with intent to deceive the public. See Clontech

Laboratories v. Invitrogen Corp., 406 F.3d 1347, 1351 (Fed. Cir. 2005). Defendant argues that the "intent to deceive the public" element of the false marking claim sounds in fraud and is therefore subject to the particularity requirements of Rule 9(b). When fraud is alleged, the complaining party has a higher

burden to "state with particularity the circumstances constituting fraud. . . ." Fed.R.Civ.P. 9(b).

Courts are split on whether false-marking claims are fraud6

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based claims that must adhere to Rule 9(b) pleading standards. Compare, e.g., Third Party Verification, Inc. v. Signaturelink, Inc., 492 F.Supp.2d 1314, 1327 (M.D.Fla. 2007) (holding that Rule 9's level of pleading is not required for false-marking claims) with Juniper Networks v. Shipley, No. C 09-0696, 2009 WL 1381873, at *4 (N.D.Cal. May 14, 2009) (holding that falsemarking claims are fraud-based and therefore subject to Rule 9's pleading requirements). In the Ninth Circuit, when a claim "is said to be grounded in fraud or to sound in fraud[,]" then that claim must satisfy the particularity requirements of Rule 9(b). Kearns v. Ford This Court

Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009).

agrees with the Northern District of California that the "intent to deceive" requirement is a "fraud-based claim" and is therefore subject to Rule 9(b). 1381873 at *4. The Court also finds that Plaintiff satisfies Rule 9(b)s heightened pleading requirement. "Averments of fraud must be See Juniper Networks, 2009 WL

accompanied by the who, what, when, where, and how of the misconduct charged." Vess v. Ciba-Geigy Corp. USA, 317 F.3d The

1097, 1106 (9th Cir. 2003) (internal citations omitted). Complaint alleges that Trimedica manufactures, advertises, distributes, and sells AlkaMAX. Complaint ¶¶ 8, 15. The

Complaint alleges that Trimedica marked AlkaMAX as patented. Complaint ¶¶ 1, 16, 17, 26. The Complaint alleges that patent

assertions were still being made as of June 03, 2010, the filing date of the Complaint. Complaint ¶¶ 1, 8, 15. The Complaint

shows a picture of the allegedly false patent claim on the 7

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AlkaMAX label.

Complaint ¶ 16.

Thus, Plaintiff has satisfied

the Rule 9(b) pleading requirements for his false marking claim. (b) Intent to Deceive

Defendant also argues that Plaintiff does not allege any specific facts concerning the "intent to deceive" element of the false marking claim. "Intent to deceive, while subjective in Clontech

nature, is established in law by objective criteria."

Laboraties, Inc., 406 F.3d at 1352 (internal citations omitted). Thus, "objective standards" control and "the fact of misrepresentation coupled with proof that the party making it had knowledge of its falsity is enough to warrant drawing the inference that there was a fraudulent intent". Id. Thus, the

plaintiff must show "by a preponderance of the evidence that the party accused of false marking did not have a reasonable belief that the articles were properly marked (i.e., covered by a patent)." Id. at 1352-53.

Plaintiff alleges AlkaMAX is not patented, has never been patented, and has never had a patent pending. Complaint ¶ 17.

Because this is a Motion to Dismiss and the Complaint avers that there existed no patent or any patent pending, at this stage Plaintiff has successfully alleged there was no reasonable belief in the veracity of the patent. Thus, Plaintiff has met

his burden and has properly stated a claim for an intent to deceive the public. Accordingly, Defendants motion to dismiss the Complaint for failure to state a claim is DENIED. /// /// 8

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3. Statute of Limitations Defendant argues that Plaintiffs claim is barred by the five year statute of limitations set forth in 28 U.S.C. § 2462. Defendant reasons that the statute of limitations began to run on the date Defendant allegedly violated Section 292, not when Plaintiff discovered the violation. Plaintiff counters that

each instance of false marking is a separate violation or injury, restarting the statute of limitations. The marking and false marking statutes exist to give the public notice of patent rights. "Congress intended the public

to rely on marking as a ,,ready means of discerning the status of intellectual property embodied in an article of manufacture or design." Clontech Laboratories, 406 F.3d at 1356 (quoting

Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 162 (1989)). False marking harms the public in a variety of

ways: it deters innovation and stifles competition in the marketplace, it dissuades potential competitors from entering the same market, it deters scientific research when an inventor sees a mark and decides to forego continued research to avoid possible infringement, and it also causes unnecessary investment in design around or costs incurred to analyze the validity or enforceability of a patent whose number has been marked upon a product with which a competitor would like to compete. Forest

Group, Inc. v. Bon Tool Co., 590 F.3d 1295, 1302-03 (Fed. Cir. 2009), (internal quotations omitted), "These injuries occur each time an article is falsely marked." Id.

This Court agrees with Federal Circuit that each instance of false marking ­ in this case, each time AlkaMAX was falsely 9

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marked or the patent assertion was made ­ is a separate violation or injury. If the Court ruled otherwise, that a

single violation tolls the statue of limitations, then the statute would be completely ineffective because a false mark violator would be able to continue to false mark as long as it could get past the proscribed time period of the statute of limitations for its first violation. 1303. See Bon Tool, 590 F.3d at

Therefore, since the Complaint alleges that the

violations were occurring contemporaneously with the filing date of the Complaint, Defendants motion to dismiss the Complaint because of the statute of limitations is DENIED.

III.

ORDER

For the reasons set forth above, Defendants motions to dismiss under Fed.R.Civ.P. 12(b)(1), 12 (b)(6) and 9(b) are DENIED. IT IS SO ORDERED. Dated: November 30, 2010

____________________________ JOHN A. MENDEZ, UNITED STATES DISTRICT JUDGE

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