Two Moms and a Toy, LLC v. International Playthings, LLC

Filing 258

ORDER granting 122 defendant's Motion to Dismiss the Third, Fourth, and Fifth Claims for Relief of the Third Amended Complaint Pursuant to Fed. R. Civ. P. 12(b)(6). Plaintiff's Third, Fourth, and Fifth claims for relief are dismissed. By Judge Philip A. Brimmer on 9/30/12.(pabsec)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 10-cv-02271-PAB-BNB
TWO MOMS AND A TOY, LLC, a Colorado limited liability company,
Plaintiff,
v.
INTERNATIONAL PLAYTHINGS, LLC, a Delaware limited liability company,
GOLOS WEISMAN DESIGN, LTD., an Israel partnership; and
YOOKIDOO, LTD., an Israel partnership,
Defendants.

ORDER

This matter is before the Court on the Motion to Dismiss [Docket No. 122] filed
by defendant International Playthings, LLC (“IPT”). The motion is fully briefed and ripe
for resolution.
I. BACKGROUND
On September 16, 2010, plaintiff Two Moms and a Toy, LLC (“Two Moms”)
brought this action against IPT because of alleged infringement of United States Patent
No. 6,782,567 (the “’567 Patent”). The ’567 patent was issued on August 31, 2004 for
an invention called the “Fountain Water Toy Utilizing A Battery-Powered Pump” and is
owned by inventors Linda Austin and Anne Argent. Docket No. 119 at 6, ¶ 12-13. Ms.
Austin and Ms. Argent have assigned their interests in the ’567 patent to plaintiff Two
Moms.

In its third amended complaint, Two Moms alleges that defendant IPT sold and
continues to sell two toys that allegedly infringe the ’567 patent under the Yookidoo,
Ltd. (“Yookidoo”) brand name. The two Yookidoo toys are called the “Flow ‘N’ Fill
Spout” and the “Stack ‘N Stream Tub Fountain.” Docket No. 119 at 7, ¶ 17. Two Moms
asserts that, in 2009, it alerted Michael Varda, president of IPT, about the alleged
infringement. Id. at 8, ¶ 18. Two Moms avers that, despite Mr. Varda’s knowledge of
the potentially infringing products, IPT continues to sell the Yookidoo toys.
Two Moms also alleges that, although IPT never applied for a patent for the
Yookidoo toys and the toys are currently not patented, IPT has falsely marked the
Yookidoo toys with “patent pending” labels. Id. at 9, ¶ 21. According to Two Moms, the
“patent pending” labels on the Yookidoo toys deter potential licensees and consumers
from purchasing the rights to the ’567 patent and from buying Two Moms products
because they are concerned about possible exposure to liability for infringing a patent.
In addition, Two Moms contends that IPT knowingly applied the “patent pending” labels
because IPT is represented by “competent patent counsel,” and “evidence exists” that
IPT continues to sell the Yookidoo toys although it was informed on April 19, 2011 that
the Yookidoo toys were unpatented and a patent application was never filed. Docket
No. 119 at 12-13, ¶¶ 26-27.
Based on the aforementioned facts, Two Moms asserts claims for relief against
IPT for (1) patent infringement in violation of 35 U.S.C. § 271(a), (2) inducing
infringement in violation of 35 U.S.C. § 271(b), (3) false marking in violation of 35
U.S.C. § 292, (4) false advertising in violation of 15 U.S.C. § 1125, and (5) deceptive
trade practices in violation of the Colorado Consumer Protection Act (“CCPA”), Colo.
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Rev. Stat. § 6-1-105 et seq. Docket No. 119 at 14-19. On October 31, 2011, IPT filed
this motion to dismiss Two Moms’ claims for false marking, false advertising, and
deceptive trade practices in violation of the CCPA. Docket No. 122 at 1.
II. STANDARD OF REVIEW
“The court’s function on a Rule 12(b)(6) motion is not to weigh potential evidence
that the parties might present at trial, but to assess whether the plaintiff’s Complaint
alone is legally sufficient to state a claim for which relief may be granted.” Dubbs v.
Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir. 2003) (citations omitted). In doing so,
the Court “must accept all the well-pleaded allegations of the complaint as true and
must construe them in the light most favorable to the plaintiff.” Alvarado v. KOB–TV,
LLC, 493 F.3d 1210, 1215 (10th Cir. 2007) (quotation marks and citation omitted). At
the same time, however, a court need not accept conclusory allegations. Moffett v.
Halliburton Energy Servs., Inc., 291 F.3d 1227, 1232 (10th Cir. 2002).
Generally, “[s]pecific facts are not necessary; the statement need only ‘give the
defendant fair notice of what the claim is and the grounds upon which it rests.’”
Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007)) (omission marks, internal quotation marks, and
citation omitted). The “plausibility” standard requires that relief must plausibly follow
from the facts alleged, not that the facts themselves be plausible. Bryson v. Gonzales,
534 F.3d 1282, 1286 (10th Cir. 2008).
However, “where the well-pleaded facts do not permit the court to infer more
than the mere possibility of misconduct, the complaint has alleged – but it has not

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shown – that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009) (internal quotation marks and alteration marks omitted). Thus, even though
modern rules of pleading are somewhat forgiving, “a complaint still must contain either
direct or inferential allegations respecting all the material elements necessary to sustain
a recovery under some viable legal theory.” Bryson, 534 F.3d at 1286 (quotation marks
and citation omitted).
III. ANALYSIS
A. False Marking
Two Moms’ third claim for relief asserts that IPT falsely marked the Yookidoo
toys in violation of 35 U.S.C. § 292.1 To assert a claim under § 292, Two Moms must
show that IPT (1) marked an unpatented article, and (2) intended to deceive the public.
Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295, 1300 (Fed. Cir. 2009). Moreover,
since the passage of the Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125
Stat. 284 (2011), a plaintiff asserting a false marking claim must also establish
“competitive injury.” Rogers v. Tristar Prods., 2012 WL 1660604 (Fed. Cir. May 2,
2012). In this case, it is undisputed that the Yookidoo toys were unpatented and no
patent application was ever filed. Therefore, the Court will focus on whether Two Moms
has alleged sufficient facts to show that IPT knowingly intended to deceive the public
and whether Two Moms has sufficiently pled a competitive injury.
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35 U.S.C. § 292 allows for a person who “has suffered a competitive injury as a
result of a violation of this section [to] file a civil action” against a person who “marks
upon, or affixes to, or uses in advertising in connection with any article, the words
‘patent applied for,’ ‘patent pending,’ or any word importing that an application for
patent has been made, when no application for patent has been made, or if made, is
not pending, for the purpose of deceiving the public.”
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1. Intent to Deceive
For a false marking claim pursuant to § 292, Two Moms must satisfy the
heightened pleading standard set forth in Rule 9(b) of the Federal Rules of Civil
Procedure. In re BP Lubricants USA., Inc., 637 F.3d 1307, 1310 (Fed. Cir. 2011). Rule
9(b) requires a plaintiff to plead in detail ‘the specific who, what, when, where, and how’
of the alleged fraud. Id. at 1309. In order to satisfy Rule 9(b)’s pleading requirements,
a plaintiff must “provide some objective indication to reasonably infer that the defendant
was aware” of his or her unlawful conduct. Id. at 1311. The facts leading to the fraud
must “set forth more than the neutral facts necessary to identify the transaction.”
Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (emphasis in original)
(citation omitted).
To show an intent to deceive, a plaintiff must show both knowledge that a
statement is false and a purpose of deceit. Pequignot v. Solo Cup Co., 608 F.3d 1356,
1363 (Fed. Cir. 2010). In this case, plaintiff’s allegations are insufficient to establish a
plausible inference that IPT knew the packages of Yookidoo toys were falsely marked
with “patent pending” labels. First, plaintiff’s allegation that IPT is represented by
competent counsel is the type of allegation that has been found insufficient to raise a
claim. See In re BP Lubricants, 637 F.3d at 1312 (finding an allegation that a
defendant was a “sophisticated company [which had] experience applying for,
obtaining, and litigating patents” is insufficient to satisfy Rule 9(b)). In addition,
plaintiff’s claim that “evidence exists that defendants GWD, Yookidoo, and IPT
continued to sell falsely marked product after being notified of the false marking on April

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19, 2011,” Docket No. 119 at 13, ¶ 27, is a conclusory allegation. Plaintiff’s complaint
does not identify what this “evidence” is that establishes that IPT continued to sell the
Yookidoo products with a “patent pending” label.2 Without identifying the specific facts
to show that IPT knowingly applied a patent pending label on Yookidoo toys after IPT
was advised there was no such patent application, plaintiff’s claim fails to meet the Rule
9(b) pleading standard.3 See In re BP Lubricants, 637 F.3d at 1311 (complaint must

2

The Court will not consider the deposition and affidavit attached to plaintiff’s
response to the motion to dismiss because these documents were not incorporated in
the complaint. See Fed. R. Civ. P. 12(d) (“If, on a motion under Rule 12(b)(6) . . .,
matters outside the pleadings are presented to and not excluded by the court, the
motion must be treated as one for summary judgment under Rule 56. All parties must
be given a reasonable opportunity to present all the material that is pertinent to the
motion.”). Plaintiff has amended its complaint three times and attached numerous
documents to its third amended complaint. Plaintiff has not shown or explained why
these specific allegations were not incorporated therein. Accordingly, the Court will rely
solely on the allegations set forth in the third amended complaint to decide the motion
to dismiss. See Gee v. Pacheco, 627 F.3d 1178, 1186 (10th Cir. 2010) (providing that
when resolving a motion to dismiss pursuant to Rule 12(b)(6) a court may consider, in
addition to the allegations of the complaint, “(1) documents that the complaint
incorporates by reference, (2) ‘documents referred to in the complaint if the documents
are central to the plaintiff’s claim and the parties do not dispute the documents’
authenticity,’ and (3) ‘matters of which a court may take judicial notice.’ ”) (citations
omitted).
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Plaintiff’s citation to U.S.A., ex rel. Vandever, LLC v. Intermatic Mfg., LTD.,
(attached to plaintiff’s response brief as Exhibit G, Docket No. 137-7), is unconvincing.
The court in Vandever found that the plaintiff alleged a plausible connection between a
defendant’s knowledge and intent because the defendant’s goods had a “patented”
label on their packages since 2008, yet defendant did not obtain a patent until 2010.
Docket No. 137-7 at 11. However, these allegations do not include any allegation that
the defendant knew its statement was false and therefore does not account for the
possibility that defendant acted only negligently. In re BP Lubricants requires that
plaintiff must show an “objective indication” that defendant was aware of the false
marking and intended to deceive. 637 F.3d 1311. Moreover, the facts of Intermatic are
different from this case. Intermatic manufactured the product that was falsely marked
as “patented” despite not having obtained a patent until 2010. Here, defendant did not
manufacture the product and the label stated “patent pending,” circumstances that do
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“provide some objective indication to reasonably infer that the defendant was aware” of
his or her unlawful conduct). Accordingly, Two Moms has not satisfied the standard
required to show that IPT knowingly acted with “a purpose of deceit.” Id. at 1313.
2. Competitive Injury
IPT also claims that Two Moms does not adequately plead that it suffered
competitive injury as the result of IPT’s false marking. Docket No 122 at 7-8. IPT
asserts that, because Two Moms is not a competitor in the sale of toys, Two Moms
cannot satisfy the competitive injury prong of the analysis. Id. Two Moms does not
dispute that it is not a competitor; rather, it asserts that non-competitors may sue under
the false marking statute. Docket No. 137 at 5.
Several district courts interpreting the newly enacted America Invents Act have
required a plaintiff to be a competitor of the defendant in order to show competitive
injury.4 See, e.g., RB Rubber Prods., Inc. v. ECORE Int’l, Inc., 2012 WL 4068557, at *8
(D. Or. Sept 14, 2012) (finding that the false marking statute required competitive injury
in the relevant market); Advanced Cartridge Techs., LLC v. Lexmark Int’l, Inc., 2011 WL
6719725, at *3-5 (M.D. Fla. Dec. 21, 2011) (patent owner who did not directly compete
with the defendant manufacturer because “even if [the patent owner plaintiff] could
prove lost licensing money because of false marking by [the defendant], the harm is still

not properly infer knowledge and intent to deceive.
4

The Tenth Circuit has construed the term “competitive injury” under the Lanham
Act to require that a plaintiff be a competitor of a defendant in order to establish
competitive injury. See, e.g., Stanfield v. Osborne Inds., Inc., 52 F.3d 867, 873 (10th
Cir. 1995) (finding that because a false advertising claim implicates unfair competition,
“to have standing for a false advertising claim, the plaintiff must be a competitor of the
defendant and allege a competitive injury.”).
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too derivative or indirect to support” a claim).5 This interpretation also finds some
support in the legislative history surrounding the passage of the America Invents Act.
See 157 Cong. Rec. S5319-03, at 5320 (daily ed. Sept. 6, 2011) (statement of Sen.
Kyl) (“The America Invents Act reins in abuses that are reflected in a recent surge in
false marking litigation. It allows such suits to be brought only by those parties who
have actually suffered competitive injury as a result of false marking.”) (emphasis
added).
Two Moms has provided no authority in support of its position that a
non-competitor can assert a claim under the newly amended false marking statute.
Moreover, Two Moms’ complaint does not identify a potential licensee who was
deterred or that any potential licensee expressed concern about IPT’s false marking.
Thus, Two Moms has not alleged actual competitive injury; it has only asserted that it
could lose or that it could have already lost potential licensees. See We-Flex, LLC v.
NBSP, Inc., 2012 WL 1440439, at *6-7 (S.D. Tex. April 25, 2012) (a competitive injury
“complaint needs to provide actual instances of cognizable injury, not just a list of
potential harms, as well as facts suggesting that the harm claimed was the result of
false marking.”). Consequently, the Court finds that, because Two Moms and IPT are
not competitors and Two Moms does not allege more than a potential injury, Two Moms
has not pled sufficient facts to plausibly assert that IPT’s false marking resulted in
5

To the extent plaintiff relies on Fasteners for Retail, Inc. v. Andersen, 2011 WL
5130445 (N.D. Ill. Oct. 28, 2011), the Court notes that the parties in that case were
direct competitors in manufacturing. See also We-Flex, LLC v. NBSP, Inc., 2012 WL
1440439, at *7 n.46 (S.D. Tex. April 25, 2012) (finding that Fasteners erred because it
did not require plaintiff to show actual injuries and allowed the allegation to proceed
based on “potential injuries.”).
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competitive injury. Fisher-Price, Inc. v. Kids II, Inc., 2011 WL 6409665, at *10
(W.D.N.Y. Dec. 21, 2011) (dismissing a claim by an actual competitor for failing to
allege sufficient facts “making it plausible to find [the false marker’s] alleged mismarking
has resulted in [the § 292 claimant] suffering a competitive injury”). Accordingly, Two
Moms’ claim for false marking is dismissed for failure to state a claim.
B. False Advertising
As noted above, in order “to have standing for a false advertising claim, the
plaintiff must be a competitor of the defendant and allege a competitive injury.”
Stanfield, 52 F.3d at 873. Because Two Moms concedes that it does not engage in the
sale of toys, Docket No. 137 at 5, it is not one of IPT’s competitors. See Stanfield, 52
F.3d at 873 (finding that an inventor of an agricultural product who granted a license to
a manufacturer to use his name as a trademark did not have standing to bring Lanham
Act false advertising claim against manufacturer because the inventor was not in
competition with the manufacturer); US West, Inc. v. Business Discount Plan, Inc., 196
F.R.D. 576, 590 (D. Colo. 2000) (finding that a telephone company lacked standing to a
bring false advertising claim under the Lanham Act against a telemarketer and a
verification services company as they were not competitors of the telephone company).
As the Tenth Circuit noted, “hopes of eventually obtaining . . . a [competitive] product
are too remote at this stage to confer standing” to bring a claim for false advertising.
Hutchinson v. Pfeil, 211 F.3d 515, 520 (10th Cir. 2000); see also TrafficSchool.com,
Inc. v. Edriver Inc., 653 F.3d 820, 826 (9th Cir. 2011) (“We have generally presumed
commercial injury when defendant and plaintiff are direct competitors and defendant’s

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misrepresentation has a tendency to mislead consumers”); Natural Answers, Inc. v.
SmithKline Beecham Corp., 529 F.3d 1325, 1331-32 (11th Cir. 2008) (noting that the
purpose of the Lanham Act is to protect those engaged in commerce). Accordingly,
because Two Moms does not compete with IPT, Two Moms’ claim for false advertising
will be dismissed.
C. Colorado Consumer Protection Act
IPT argues that plaintiff’s claim under the CCPA should be dismissed because
plaintiff does not allege with the required specificity that IPT engaged in deceptive trade
practices in violation of Colo. Rev. Stat. § 6-1-105. Docket No. 122 at 14.
A valid claim under the CCPA consists of the following elements: “(1) that the
defendant engaged in an unfair or deceptive trade practice; (2) that the challenged
practice occurred in the course of defendant's business, vocation, or occupation; (3)
that it significantly impacts the public as actual or potential consumers of the
defendant's goods, services, or property; (4) that the plaintiff suffered injury in fact to a
legally protected interest; and (5) that the challenged practice caused the plaintiff's
injury.” Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142,
146-47 (Colo. 2003). All elements of a CCPA claim must be met; otherwise, the claim
falls as a matter of law. HealthONE of Denver, Inc. v. UnitedHealth Group, Inc., 805 F.
Supp. 2d 1115, 1120 (D. Colo. 2011).
To assert a claim under the CCPA, Two Moms must meet the heightened Rule
9(b) pleading standard. HealthONE, 805 F. Supp. 2d at 1120-21. In its complaint, Two
Moms asserts the following with respect to IPT’s conduct in violation of the CCPA:

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b. [IPT] Knowingly [made] false representations as to the characteristics
and/or benefits of the Yookidoo Bath Tub Fountain toys by, among other
things, falsely representing that a patent application(s) has been filed for
such toys (C.R.S. § 6-1-105(1)(d));
c. [IPT] Represent[ed] that their products, the Yookidoo Bath Tub
Fountain toys are of a particular standard, quality, or grade (i.e., “patent
pending”) knowing that a patent application(s) has not been filed for such
toys (C.R.S. §6-1-105(g)); and
d. [IPT] Fail[ed] to disclose material information concerning the Yookidoo
Bath Tub Fountain toys including but not necessarily limited to the fact
that a patent application(s) has not been filed for such toys-which
information was known at the time Defendants GWD, Yookidoo and IPT
falsely marked and advertised the Yookidoo Bath Tub Fountain toys as
“patent pending”, and Defendant Yookidoo’s and IPT’s failure to disclose
such information was intended to induce consumers to purchase the
Yookidoo Bath Tub Fountain toys (C.R.S. § 6-1-105(1)(u)).
Docket No. 119 at 18-19, ¶ 53 (emphasis added). As the Court discussed above, these
facts are insufficient to show that IPT sanctioned the use of the “patent pending” label
on the Yookidoo toys with the knowledge that the label was false. See Crowe v. Tull,
126 P.3d 196, 204 (Colo. 2006) (“A CCPA claim will only lie if the plaintiff can show the
defendant knowingly engaged in a deceptive trade practice.”) (citation omitted);
HealthONE, 805 F. Supp. 2d at 1121 (“Rule 9(b) requires a complaint to ‘set forth the
time, place and contents of the false representation, the identity of the party making the
false statements and the consequences thereof,’” citing Koch v. Koch Industries, Inc.,
203 F.3d 1202, 1236 (10th Cir. 2000)). Given that plaintiff’s complaint fails to meet the
particularity required to assert a valid CCPA claim, plaintiff’s claim pursuant to the
CCPA will be dismissed.6
6

Because plaintiff’s CCPA claim is dismissed for failure to allege sufficient facts,
the Court need not decide whether plaintiff’s CCPA claim is preempted by the Lanham
Act.
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IV. CONCLUSION
For the foregoing reasons, it is
ORDERED that Defendant’s Motion to Dismiss the Third, Fourth, and Fifth
Claims for Relief of the Third Amended Complaint Pursuant to Fed. R. Civ. P. 12(b)(6)
[Docket No. 122] is GRANTED. It is further
ORDERED that plaintiff’s Third, Fourth, and Fifth claims for relief are dismissed.

DATED September 30, 2012.
BY THE COURT:

s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge

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