United Tactical Systems, LLC v. Real Action Paintball, Inc. et al

Filing 211

ORDER by Judge Maria-Elena James granting 193 Motion to Lift Stay; granting in part and denying in part 203 Motion to Dismiss (mejlc2S, COURT STAFF) (Filed on 2/10/2016)

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1 2 UNITED STATES DISTRICT COURT 3 NORTHERN DISTRICT OF CALIFORNIA 4 UNITED TACTICAL SYSTEMS, LLC, 5 Case No. 14-cv-04050-MEJ Plaintiff, 6 ORDER RE: MOTION TO DISMISS AND MOTION TO LIFT DISCOVERY STAY v. 7 REAL ACTION PAINTBALL, INC., et al., 8 Re: Dkt. Nos. 193, 203 Defendants. 9 10 AND RELATED ACTION AND CROSS ACTION United States District Court Northern District of California 11 12 13 INTRODUCTION 14 Real Action Paintball, Inc. and its principal, K.T. Tran, (collectively “Real Action”)1 filed 15 multiple counterclaims in this matter (Second Am. Counterclaim (“SACC”), Dkt. No. 198), which 16 United Tactical Systems, LLC (“UTS”) and related Counter-Defendants (collectively with UTS, 17 “Counter-Defendants”)2 now move to dismiss in part pursuant to Federal Rule of Civil Procedure 18 (“Rule”) 12(b)(6). Mot., Dkt. No. 203. Real Action filed an Opposition (Dkt. No. 208), and 19 Counter-Defendants filed a Reply (Dkt. No. 209). Also pending before the Court is Real Action‟s 20 Motion for an Order to Lift the Stay on discovery. Dkt. No. 193. Having considered the parties‟ 21 positions, relevant legal authority, and the record in this case, the Court GRANTS Real Action‟s 22 Motion to Lift the Discovery Stay and GRANTS IN PART and DENIES IN PART Counter- 23 24 25 26 27 28 1 The Court refers to both K.T. Tran and Real Action Paintball, Inc. as “Real Action” as there is no material difference between the company and its principal for purposes of this Order. CounterDefendants also sometimes refer to Real Action as “Counter-Claimants.” 2 “Counter-Defendants” refers to Advanced Tactical Ordnance Systems, LLC (“ATO”), Perfect Circle Projectiles LLC, Gary Gibson, Tiberius Arms, LLC, Tactical Air Games, Inc., Tyler Tiberius, Michael Blumenthal, David Piell, UTS, United Tactical Systems Holdings, LLC, and United Tactical Systems Intermediate Holdings, LLC. 1 2 3 Defendants‟ Motion to Dismiss for the following reasons. BACKGROUND A more complete factual background in this case can be found in the Court‟s November 4 10, 2015 Order granting in part and denying in part Counter-Defendants‟ Motions to Dismiss and 5 Strike Real Action‟s First Amended Counterclaim (“FACC”). Dkt. No. 191. To the extent Real 6 Action has asserted new or different relevant allegations in the SACC, filed on November 23, 7 2015, those allegation are discussed below. 8 MOTION TO LIFT DISCOVERY STAY As to Real Action‟s Motion to Lift the Discovery Stay, in the Court‟s May 11, 2015 Order 10 denying Counter-Defendants Perfect Circle, Gary Gibson, Michael Blumenthal, and David Piell‟s 11 United States District Court Northern District of California 9 Motions to Dismiss for lack of personal jurisdiction, the Court consolidated this case (the “UTS 12 Case”) with Real Action Paintball, Inc. v. Advanced Tactical Ordnance Systems, LLC et al., Case 13 No. 14-2435-MEJ (N.D. Cal.) (the “ATO Case”). Dkt. No. 140. Previously, the Court had issued 14 an Order in the ATO Case limiting the scope of discovery until the resolution of the pending 15 jurisdictional motions. Specifically, the Court held that “[p]ending resolution of Defendants‟ 16 motions to dismiss, all discovery in this case shall be limited to that which aids in determining 17 whether this Court has jurisdiction.” ATO Case, Dkt. No. 80. Now, following resolution of those 18 personal jurisdiction motions and the consolidation of the ATO and UTS Cases, Real Action seeks 19 to proceed with full discovery, while Counter-Defendants urge the Court to rule on their Motion to 20 Dismiss before doing so. See Mot. to Lift Stay; Opp‟n to Mot. to Lift Stay, Dkt. No. 201 21 (suggesting discovery open once pleadings have been settled). 22 As discussed below, this Order “settles” the pleadings in this case, and accordingly, to the 23 extent it is necessary to do so, the Court now GRANTS Real Action‟s Motion to Lift the 24 Discovery Stay. A related case management order is forthcoming. 25 26 MOTION TO DISMISS Turning to Counter-Defendants‟ Motion, they seek to dismiss Real Action‟s following 27 counterclaims: (1) the tenth claim for false designation of origin against Tyler Tiberius and Gary 28 Gibson; and (2) the eleventh claim for violations of the Sherman Act. 2 1 A. Legal Standard 2 Rule 8(a) requires that a complaint contain a “short and plain statement of the claim 3 showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A complaint must therefore 4 provide a defendant with “fair notice” of the claims against it and the grounds for relief. Bell Atl. 5 Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations and citation omitted). 6 A court may dismiss a complaint under Rule 12(b)(6) when it does not contain enough 7 facts to state a claim to relief that is plausible on its face. Id. at 570. “A claim has facial 8 plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable 9 inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard is not akin to a „probability requirement,‟ but it asks for 11 United States District Court Northern District of California 10 more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 12 U.S. at 557). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need 13 detailed factual allegations, a plaintiff‟s obligation to provide the „grounds‟ of his „entitle[ment] to 14 relief‟ requires more than labels and conclusions, and a formulaic recitation of the elements of a 15 cause of action will not do. Factual allegations must be enough to raise a right to relief above the 16 speculative level.” Twombly, 550 U.S. at 555 (internal citations and parentheticals omitted). 17 In considering a motion to dismiss, a court must accept all of the plaintiff‟s allegations as 18 true and construe them in the light most favorable to the plaintiff. Id. at 550; Erickson v. Pardus, 19 551 U.S. 89, 93-94 (2007); Vasquez v. Los Angeles Cty., 487 F.3d 1246, 1249 (9th Cir. 2007). In 20 addition, courts may consider documents attached to the complaint. Parks Sch. of Bus., Inc. v. 21 Symington, 51 F.3d 1480, 1484 (9th Cir. 1995) (citation omitted). 22 If a Rule 12(b)(6) motion is granted, the “court should grant leave to amend even if no 23 request to amend the pleading was made, unless it determines that the pleading could not possibly 24 be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en 25 banc) (internal quotations and citations omitted). However, the Court may deny leave to amend 26 for a number of reasons, including “undue delay, bad faith or dilatory motive on the part of the 27 movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice 28 to the opposing party by virtue of allowance of the amendment, [and] futility of amendment.” 3 1 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (citing Foman v. 2 Davis, 371 U.S. 178, 182 (1962)). 3 B. 4 False Designation of Origin Claim Against Tyler Tiberius and Gary Gibson To prove an infringement/false designation of origin claim under 15 U.S.C. § 5 1125(a)(1)(A), a plaintiff must demonstrate the following: (1) defendant uses a designation (any 6 word, term, name, device, or any combination thereof) or false designation of origin; (2) the use 7 was in interstate commerce; (3) the use was in connection with goods or services; (4) the 8 designation or false designation is likely to cause confusion, mistake, or deception as to (a) the 9 affiliation, connection, or association of defendant with another person, or (b) as to the origin, sponsorship, or approval of defendant‟s goods, services, or commercial activities by another 11 United States District Court Northern District of California 10 person; and (5) the plaintiff has been or is likely to be damaged by these acts. See Summit Tech., 12 Inc. v. High-Line Med. Instruments, Co., 933 F. Supp. 918, 928 (C.D. Cal. 1996). 13 A corporate “officer or director is, in general, personally liable for all torts which he 14 authorizes or directs or in which he participates, notwithstanding that he acted as an agent of the 15 corporation and not on his own behalf.” Murphy Tugboat Co. v. Shipowners & Merchants 16 Towboat Co., 467 F. Supp. 841, 852 (N.D. Cal. 1979) (citations omitted), aff’d sub nom. Murphy 17 Tugboat Co. v. Crowley, 658 F.2d 1256 (9th Cir. 1981), cert. denied, 455 U.S. 1018 (1982); 18 Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999). 19 Accordingly, courts have found owners and operators of a corporate entity to be directly liable for 20 trademark and false designation of origin claims. See, e.g., Symantec Corp. v. Logical Plus, Inc., 21 2009 WL 3416178, at *4 (N.D. Cal. Oct. 20, 2009). They have also, however, rejected claims 22 against officers of infringing corporate entities where plaintiff failed to provide allegations 23 showing how those officers “directed or participated in the infringement directly[.]” See id. at *8. 24 The Court previously dismissed Real Action‟s False Designation of Origin claim against 25 Gibson and Tiberius, the alleged owners of Perfect Circle and Tiberius Arms, respectively, finding 26 that Real Action had failed to allege facts “suggest[ing] Gibson and Tiberius actually played any 27 role in directing or participating in ATO‟s decision to use the Pepperball name” or otherwise 28 “indicating they played an active role in ATO‟s decision-making process or why they might be 4 1 expected to play such a role (i.e., if such activity would be expected as a function of their positions 2 within ATO, etc.).” Order re: Mot. to Dismiss & Strike at 34. The Court, however, permitted 3 Real Action leave to amend this claim. Id. Counter-Defendants now assert that Real Action still 4 fails to allege plausible allegations that Gibson or Tiberius directed or directly participated in the 5 alleged infringement. Mot. at 4. Rather than alleging such facts, Counter-Defendants contend 6 Real Action only added conclusory allegations about Gibson and Tiberius‟s involvement, which 7 are no more than mere legal conclusions. Id. at 4-5. They further assert the SACC does not 8 specify the allegedly tortious actions or how Gibson and Tiberius directly participated. Id. Having reviewed the SACC, the Court finds Real Action now alleges sufficient facts 9 supporting a False Designation of Origin claim against Tiberius and Gibson for purposes of the 11 United States District Court Northern District of California 10 pleading stage. While previously Real Action‟s only allegation in this claim about Tiberius and 12 Gibson was that they induced ATO to misrepresent itself as Pepperball Tech (see FACC ¶ 121, 13 Dkt. No. 152), the SACC now contains more allegations about how Gibson allegedly hired and 14 directed former Pepperball Tech employees to work for ATO and masquerade as Pepperball Tech 15 (SACC ¶ 114) and how Tiberius allegedly caused the Pepperball Tech website to be created and 16 caused ATO and UTS to advertise claims about Pepperball products on their websites (id. ¶¶ 117, 17 120). These allegations, in tandem with the continued allegations that Gibson and Tiberius 18 formed ATO with their companies Perfect Circle (allegedly owned by Gibson) and Tactical Air 19 and Tiberius Arms (allegedly co-owned by Tiberius) (id. ¶¶ 21-23), provide a plausible basis for 20 concluding that Gibson and Tiberius participated, authorized, or directed in the conduct giving rise 21 to Real Action‟s false designation claim. Adobe Sys. Inc. v. Software Speedy, 2014 WL 7186682, 22 at *4 (N.D. Cal. Dec. 16, 2014) (“Personal liability on the part of corporate officers have typically 23 involved instances where the defendant was the guiding spirit behind the wrongful conduct . . . .” 24 (quotation omitted)). Accordingly, Counter-Defendants‟ Motion to Dismiss Gibson and Tiberius 25 from Real Action‟s False Designation claim is DENIED. 26 C. 27 28 Sherman Act Claims In general, antitrust actions based on litigation activities are not permissible unless the lawsuit was a “sham,” i.e., there is proof that (1) the suit was “objectively baseless in the sense 5 1 that no reasonable litigant could realistically expect success on the merits,” and (2) there was 2 subjective intent to use the litigation to interfere directly with the business relationships of a 3 competitor. Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61 4 (1993) (describing the Noerr-Pennington3 doctrine, which establishes that those persons who 5 petition the government for redress, including to the courts, are generally immune from antitrust 6 liability). Of course, “[p]roof of a sham merely deprives the defendant of immunity; it does not 7 relieve the plaintiff of the obligation to establish all other elements of his claim.” Id. at 61. 8 The Court previously found that the FACC “f[e]ll short of pleading a viable Sherman Act 9 violation” because it failed to allege that ATO had market power in a relevant geographic market. Order re: Mot. to Dismiss & Strike at 35. However, the Court granted Real Action leave to 11 United States District Court Northern District of California 10 amend, and otherwise declined then to dismiss the claim outright in the event that Real Action 12 could allege plausible facts supporting the factors in the Professional Real Estate test. Id. at 35- 13 37. In doing so, the Court noted “Real Action need not necessarily show that the litigation against 14 it was objectively baseless, but rather may allege facts that the litigation against others was 15 objectively baseless.” Id. at 36. The Court also noted that activities unrelated to a “petitioning 16 activity” are not limited by Professional Real Estate or the related Noerr-Pennington doctrine. Id. 17 (citing Select Portfolio Servicing v. Valentino, 875 F. Supp. 2d 975, 987 (N.D. Cal. 2012)). Counter-Defendants assert that Real Action‟s SACC fails to overcome the limitations 18 19 established by Professional Real Estate and the Noerr-Pennington doctrine and otherwise fails to 20 state a Sherman Act claim. First, they contend Real Action has not alleged facts to show the 21 initial litigation against Real Action or related defendants in that case—i.e., Apon International 22 (“Apon”), and Conrad Sun and Sun LLC (often referred to collectively as “Sun”)—was 23 “objectively baseless.” Second, to the extent Real Action attempts to make out an antitrust claim 24 based on a reverse payment settlement as in F.T.C. v. Actavis, Counter-Defendants argue that case 25 is inapposite and does not control. Third, they contend the SACC fails to alleged concerted action 26 by Counter-Defendants. See Mot. at 5-8. 27 3 28 Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); United Mine Workers v. Pennington, 381 U.S. 657 (1965). 6 In response, Real Action points out that its SACC states the following: 1 2 The suits in the Indiana federal court against Real Action, against Sun, and against APON, were each objectively baseless. The suit against Real Action, Sun and APON were objectively baseless insofar as the Alleged Monopolists (1) dissembled to the Indiana Court, (2) did not own the mark they claimed to own, (3) had no evidence of any kind that Real Action, or Sun, or APON ever unlawfully sold irritant projectiles bearing the Pepperball mark, (4) did not own the trade secret they claimed to own, and (5) lacked jurisdiction to sue Real Action in Indiana, making any orders of the Court to the contrary “void ab initio.” Federal Sav. and Loan Ins. Corp. v. PSL Realty Co., 630 F.2d 515, 521 (7th Cir. 1980)[] (holding “where as here, the court lacks jurisdiction to adjudicate the principal matter, its orders . . . are likewise . . . void ab initio”). 3 4 5 6 7 8 9 SACC ¶ 126.4 As an additional sixth point, Real Action alleges: 10 Evidence of the objectively baseless nature of the lawsuits against Sun and APON can also be found in the Settlement Agreements. In the respective Settlement Agreements with Sun and APON on the one hand and Counter-Defendants on the other, Counter-Defendants were required to make payments to Sun and APON. Had the suits against Sun and/or APON been valid then the Counter-Defendants would have received payments from those the then-defendants, not paid money to them. United States District Court Northern District of California 11 12 13 14 15 Id. ¶ 127. The Court considers each of these allegations to determine whether Real Action overcomes 16 17 the limitations established by Professional Real Estate and Noerr-Pennington or otherwise shows 18 these limitations are inapplicable. 19 1. Allegations in Paragraph 126 20 Paragraph 126 of the SACC addresses five separate points on which Real Action alleges 21 the Indiana Action was objectively baseless. Approaching these points in reverse order, as to Real 22 Action‟s fifth point, which is premised on the fact that the Indiana Court did not have personal 23 jurisdiction over Real Action and therefore any actions by that court or ATO were objectively 24 baseless, the Court finds this argument unpersuasive. The question in determining whether an 25 action was objectively baseless is whether “no reasonable litigant could realistically expect 26 success on the merits[.]” Prof’l Real Estate, 508 U.S. at 60-61 (emphasis added). Real Action‟s 27 4 28 Real Action‟s “Alleged Monopolists” refers to ATO, Perfect Circle, Tiberius Arms, and Tactical Air Games. SACC ¶ 124. 7 1 arguments about the Indiana Court‟s exercise of personal jurisdiction do not show that ATO could 2 not have realistically expected success on the merits of their trademark and related claims against 3 Real Action or against Apon, Conrad Sun, or Sun LLC. In other words, ATO‟s mistake in filing 4 its claims against Real Action in Indiana does not undermine the reasonableness of the actual 5 merits of ATO‟s claims. As to Real Action‟s second, third, and fourth points, they all relate to claims that the 6 7 Indiana Court found ATO had demonstrated a likelihood of success on the merits for purposes of 8 preliminary injunctions against Real Action. See Req. for Judicial Notice, Ex. C (Indiana Court‟s 9 preliminary injunction order), Dkt. No. 203-1.5 Even if Real Action is correct that the Indiana Court‟s rulings were void ab initio for lack of jurisdiction over Real Action, its findings 11 United States District Court Northern District of California 10 undermine the plausibility of Real Action‟s allegations indicating that a reasonable litigant could 12 not have realistically expected success on the merits of ATO‟s claims in the underlying litigation. 13 Prof’l Real Estate, 508 U.S. at 62-63 (“Probable cause to institute civil proceedings requires no 14 more than a „reasonable belief that there is a chance that a claim may be held valid upon 15 adjudication.‟” (quotation and some internal marks omitted)). Real Action has not otherwise 16 shown that ATO lacked probable cause to bring suit against Real Action, Apon, Conrad Sun, and 17 Sun LLC; indeed, this Court, like the Indiana Court, found that ATO was likely to succeed in 18 several of its claims against Real Action. See Columbia Pictures Indus., Inc. v. Prof’l Real Estate 19 Inv’rs, Inc., 944 F.2d 1525, 1532 (9th Cir. 1991) (“Simply stated, a suit brought with probable 20 cause does not fall within the sham exception to the Noerr-Pennington doctrine.”), aff’d, Prof’l 21 Real Estate, 508 U.S. at 60 (“If an objective litigant could conclude that the suit is reasonably 22 calculated to elicit a favorable outcome, the suit is immunized under Noerr, and an antitrust claim 23 premised on the sham exception must fail.” (footnote omitted)). Finally, Real Action‟s first point indicating that ATO concealed information from the 24 25 Indiana Court is not adequately explained and lacks plausibility at this point, particularly in light 26 5 27 28 The Court previously took judicial notice of this document in its preliminary injunction order. Dkt. No. 85 at 5, 8-9; see also Reyna Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n. 6 (9th Cir. 2006) (it is appropriate to take judicial notice of court filings and other matters of public record such as pleadings in related litigation). 8 1 of this Court‟s own findings in the preliminary injunction order. See Preliminary Inj. Order, Dkt. 2 No. 85. 3 In sum, the allegations of paragraph 126 of the SACC lack plausibility to show that ATO‟s 4 claims in the Indiana Action were objectively baseless such that ATO and the related Counter- 5 Defendants must be deprived of Noerr-Pennington antitrust immunity. In other words, Real 6 Action may not maintain its antitrust claims against Counter-Defendants related to conduct based 7 on the allegations in paragraph 126 as Counter-Defendants are entitled to antitrust immunity under 8 Professional Real Estate and the Noerr-Pennington doctrine. Accordingly, the Court GRANTS 9 Counter-Defendants‟ Motion to Dismiss Real Action‟s Sherman Act claims to the extent they are 10 based on claims alleged in Paragraph 126. United States District Court Northern District of California 11 2. Allegations in Paragraph 127 12 Paragraph 127, however, raises facts that warrant further consideration, alleging that while 13 ATO sued Apon, Conrad Sun, and Sun LLC in the underlying Indiana Action, in their settlement 14 agreements, ATO ended up paying those defendants instead of the other way around. In doing so, 15 ATO agreed to pay Apon to stay out of the irritant projectile market for ten years (SACC ¶¶ 48, 16 94) and Sun to “get out of the business” and breach its contract with Real Action (id. ¶¶ 91-93). 17 The question then is whether these allegations based on the settlement agreements with Apon and 18 Sun could support a viable antitrust claim. 19 Counter-Defendants contend that, under Columbia Pictures, antitrust immunity is 20 generally extended to the “settlement process” and notes Real Action has made no attempt to 21 distinguish Columbia Pictures from the circumstances here. Reply at 4. In Columbia Pictures, 22 plaintiff Columbia Pictures sued hotel operators for copyright infringement after the operators 23 rented video discs to hotel guests. Defendant Professional Real Estate Investors (“PREI”) brought 24 antitrust counterclaims based in part on Columbia Pictures‟ refusal to enter into settlement 25 negotiations. PREI issued a settlement offer to license the videos from Columbia Pictures, and 26 when it rejected the offer, PREI alleged Columbia Pictures violated antitrust laws with its 27 “concerted refusal to deal.” The Ninth Circuit concluded Noerr-Pennington applied to such 28 conduct because “[a] decision to accept or reject an offer of settlement is conduct incidental to the 9 1 prosecution of the suit and not a separate and distinct activity which might form the basis of the 2 antitrust liability.” 944 F.2d at 1528 (emphasis added). 3 Subsequent courts have limited Columbia Pictures‟ holding to its facts, i.e., cases 4 involving the offer or rejection of a settlement. See Select Portfolio Servicing v. Valentino, 875 F. 5 Supp. 2d 975, 986-87 (N.D. Cal. 2012). As Judge Susan Illston noted in Select Portfolio, “[t]he 6 offer and rejection of a settlement to resolve the claims raised in a petition are far more related to 7 that petition then later actions taken pursuant to terms of a settlement agreement.” Id. Thus, 8 before applying the Noerr-Pennington doctrine, courts have more cautiously considered whether a 9 defendant‟s conduct is in fact incidental to its prosecution of a suit or whether the conduct can be more fairly said to be outside of or unrelated to the petitioning activity. See id. (finding Noerr- 11 United States District Court Northern District of California 10 Pennington inapplicable where the defendant‟s challenged conduct was based on a settlement 12 agreement term that was unrelated to the petitioning activity in the underlying case); eBay Inc. v. 13 Bidder’s Edge Inc., 2000 WL 1863564, at *2 (N.D. Cal. July 25, 2000) (“BE‟s antitrust claims 14 may not be dismissed under the Noerr-Pennington doctrine because at least some of eBay‟s 15 allegedly anti-competitive conduct, such as eBay‟s alleged interference with a BE advertising 16 contract, is unrelated to any protected activity.” (footnote omitted)); see also Theofel v. Farey- 17 Jones, 359 F.3d 1066, 1079 (9th Cir. 2004) (reflecting skepticism that the Noerr-Pennington 18 doctrine applied where defendants‟ challenged conduct related to the issuance of an allegedly 19 abusive discovery request and rejecting the notion that courts should only look to the merits of the 20 underlying litigation to determine immunity rather than the allegedly unlawful conduct itself). 21 Counter-Defendants assert that “[t]he relief gained by ATO in reaching settlements with 22 Sun and APON was not „unrelated‟ to ATO‟s petitioning activity.” Reply at 5. They explain that 23 “[t]he settlement terms which Counter-Claimants allege to be anti-competitive were consistent 24 with ATO‟s prayer for injunctive relief in the Indiana Action” and that “trade secret 25 misappropriation and trademark claims are by nature anti-competitive because they cease or 26 discourage business activity on the basis that it violates trademark or trade secret laws. ATO‟s 27 settlement agreements with Sun and APON were no exception.” Id. Additionally, Counter- 28 Defendants challenge the application of Select Portfolio to this case, distinguishing that case from 10 1 the circumstances here on the basis of the outcome of the settlement agreements. Id. at 4-5 n.1. 2 They explain: 3 Apon and Sun being restricted from doing business with Real Action was a foreseeable result of the Indiana Action because both trademark and trade secret laws allow for preliminary injunctions to enjoin business activity. On the other hand, the defrauding of a bank in Select Portfolio by reporting a lower price for a short sale was never a foreseeable result of the foreclosure action preceding the Select Portfolio action. The settlement in the Indiana Action was foreseeable, but the settlement in Select Portfolio was procured by fraud. 4 5 6 7 8 9 Id. There is some logic to Counter-Defendants‟ theory about the foreseeability of the terms of a settlement agreement based on the claims raised in the underlying litigation being an important 11 United States District Court Northern District of California 10 indicator of the relatedness of the allegedly unlawful conduct to the petitioning activity. But what 12 is missing from Counter-Defendants‟ explanation is how the allegedly monopolistic outcome of 13 the settlement agreements—with Apon and Sun allegedly agreeing to stay out of the irritant 14 projectile market—was a foreseeable outcome of the trademark and trade secret claims ATO 15 brought against them in the Indiana Action. The alleged outcome of the settlement agreements 16 appears to go beyond the foreseeable outcome of ATO‟s litigation against Apon and Sun. 17 Although Counter-Defendants indicate that trademark rights are somewhat anticompetitive 18 in nature, and therefore some anticompetitive result was a probable consequence of the trademark 19 litigation against Apon and Sun, those rights are not unlimited. As courts have recognized, 20 “[b]ecause a trademark . . . merely enables the owner to bar others from use of the mark, as 21 distinguished from competitive manufacture and sale of identical goods bearing another mark, . . . 22 the opportunity for effective antitrust misuse of a trademark, as distinguished from collateral anti- 23 competitive activities on the part of the manufacturer or seller of the goods bearing the mark, is so 24 limited that it poses a far less serious threat to the economic health of the nation.” Guichard v. 25 Mandalay Pictures, LLC, 2005 WL 2007883, at *3 (N.D. Cal. Aug. 22, 2005) (quoting Clorox Co. 26 v. Sterling Winthrop, Inc., 117 F.3d 50, 56 (2d Cir. 1997)) (some internal marks omitted); see also 27 Cal. Packing Corp. v. Sun-Maid Raisin Growers of Cal., 165 F. Supp. 245, 250-51 (S.D. Cal. 28 1958) (finding that private agreement limiting the use of a certain mark does not raise antitrust 11 1 concerns because it only restricted use of the name, rather than preventing competitor from 2 engaging in competitive production and sales in the market). 3 Real Action‟s SACC allegations indicate the Apon and Sun settlement agreements prevent 4 these companies from competing in the market against ATO or from working with Real Action 5 Paintball as it attempts to compete with ATO. SACC ¶¶ 48, 91-94, 130-31. Indeed, Real Action 6 indicates ATO paid Apon and Sun to secure their agreements not to compete. Id. ¶ 127. Taking 7 these facts as true, Real Action plausibly alleges that at least some of the terms in the Apon and 8 Sun settlement agreements and related agreed-on conduct go beyond ATO‟s petitioning activities 9 and its claims in the Indiana Action. While Counter-Defendants will have an opportunity to test these allegations at summary judgment, at present, the Court cannot find Counter-Defendants‟ 11 United States District Court Northern District of California 10 alleged conduct related to the Apon and Sun settlement agreements sufficiently related or 12 incidental to ATO‟s petitioning activities in the Indiana Action, and as such, finds the Noerr- 13 Pennington doctrine does not bar Real Action‟s related antitrust claims at this time. 14 Likewise, at this stage, the Court need not find whether F.T.C. v. Actavis applies to Real 15 Action‟s Sherman Act claims. For purposes of this Order and the Court‟s previous Order on 16 Counter-Defendants‟ Motions to Dismiss and Strike, Actavis primarily represents the cautious 17 skepticism that may be applied in the context of reverse payment settlement agreements, i.e., 18 where the plaintiff ends up paying the defendant essentially not to compete, rather than the 19 defendant paying the plaintiff as would usually be the case, as well as the recognition that 20 settlements are not necessarily absolutely immune from the antitrust laws. See F.T.C. v. Actavis, 21 Inc., 133 S. Ct. 2223, 2233 (2013) (considering antitrust liability in the context of “reverse 22 payment settlements,” in which “a party with no claim for damages . . . walks away with money 23 simply so it will stay away from the patentee‟s market.”). Both parties ask the Court to weigh in 24 further about the applicability of Actavis to this case, but the Court declines to do so at this time 25 given the state of the law and the stage of this case. The so-called “reverse payment liability” 26 alleged in the SACC (¶ 134) does not at this point represent a claim separate and apart from Real 27 Action‟s other Sherman Act claims, and therefore it is not necessary to parse the SACC to such a 28 degree at this time. At present, it suffices that the Noerr-Pennington doctrine does not presently 12 1 bar Real Action‟s Sherman Act claims to the extent they are based on the Apon and Sun 2 settlement agreements. 3 As a final note, Counter-Defendants challenge whether the SACC alleges concerted action. 4 See Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 190 (2010) (“Section 1 applies only 5 to concerted action that restrains trade. Section 2, by contrast, covers both concerted and 6 independent action, but only if that action „monopolize[s],‟ . . . or „threatens actual 7 monopolization[.]‟” (quotations omitted)). They assert that ATO was the only Counter- 8 Defendant who was party to the Apon and Sun settlement agreements and that the SACC does not 9 allege facts showing that any party other than ATO engaged in anticompetitive behavior. Mot. at 8. Real Action‟s response focuses only on how Counter-Defendants were involved in conduct 11 United States District Court Northern District of California 10 related to allegations the Court finds implausible and incapable of supporting an antitrust claim, as 12 discussed above. See SACC ¶ 126; Opp‟n at 9-11. Nonetheless, in Counter-Defendants‟ Reply, 13 they indicate their request for dismissal on the basis of inadequate allegations of concerted action 14 is limited to removing Tiberius Arms from this claim. See Reply at 8 (in the heading, only noting 15 that “Counter-Claimants‟ Allegations Of Concerted Action Are Inadequate As To Tiberius 16 Arms”). Specifically, they note “Counter-Claimants do not allege that Tiberius Arms was a party 17 to the settlement agreements or a signatory to any guaranty.” Id. They explain that “[a]lthough 18 the FACC alleged that Tiberius Arms was a signatory to a guaranty referenced by the settlement 19 agreement between Sun and ATO (Dkt. No. 152 at ¶ 134), this allegation was removed in the 20 SACC. (See Dkt. No 198 at ¶ 132 („Tactical Air and Perfect Circle were parties . . . by virtue of 21 the Guaranty . . .).)‟”. Id. As Counter-Defendants only appear to challenge whether Tiberius 22 Arms was involved in concerted action, the Court limits this Order to consideration of that issue. 23 Having reviewed the SACC, while Real Action provides conclusory allegations that 24 Tiberius Arms was one of the “Alleged Monopolists,” and that through their “concerted 25 agreements” ATO entered in to the settlement agreements with Apon and Sun (SACC ¶¶ 124, 26 130-31), the SACC does not articulate what basis Real Action alleges Tiberius Arms was part of a 27 concerted agreement to form or establish the settlement agreements, or how Tiberius Arms was 28 even involved. See Iqbal, 556 U.S. at 678 (“A claim has facial plausibility when the plaintiff 13 1 pleads factual content that allows the court to draw the reasonable inference that the defendant is 2 liable for the misconduct alleged.”); see also SACC ¶ 132 (explaining how Tactical Air and 3 Perfect Circle were parties to the Sun agreement by virtue of a guaranty). Without more, the 4 Court agrees Real Action has not alleged facts supporting that Tiberius Arms was involved in 5 concerted action with the other “Alleged Monopolists” as to the settlement agreements. 6 Accordingly, the Court GRANTS Counter-Defendants‟ Motion to Dismiss Tiberius Arms from 7 Real Action‟s Sherman Act claims to the extent those claims are based on concerted action. CONCLUSION 8 9 Based on the foregoing analysis, the Court GRANTS Real Action‟s Motion to Lift the Stay on Discovery and GRANTS IN PART and DENIES IN PART Counter-Defendants‟ 11 United States District Court Northern District of California 10 Motion to Dismiss as follows: 12 13 (1) The Court DENIES Counter-Defendants‟ Motion to Dismiss Real Action‟s False Designation of Origin Claim against Tyler Tiberius and Gary Gibson. 14 (2) The Court GRANTS Counter-Defendants‟ Motion to Dismiss Real Action‟s Sherman Act 15 claims to the extent they are based on the allegations in SACC ¶ 126, which Counter- 16 Defendants have shown are barred under Noerr-Pennington. 17 (3) The Court, however, DENIES Counter-Defendants‟ Motion to Dismiss Real Action‟s 18 Sherman Act claims to the extent they are based on the allegations in SACC ¶ 127, related 19 to the procurement of the Apon and Sun settlement agreements, which fall outside Noerr- 20 Pennington‟s reach as currently alleged. That said, Real Action has not alleged plausible 21 facts about how Tiberius Arms engaged in concerted action related to the settlement 22 agreements, and accordingly, the Court GRANTS Counter-Defendants‟ Motion to Dismiss 23 Tiberius Arms from Real Action‟s Sherman Act claims to the extent those claims are based 24 on concerted action. 25 IT IS SO ORDERED. 26 27 28 Dated: February 10, 2016 ______________________________________ MARIA-ELENA JAMES United States Magistrate Judge 14

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