CANFIELD SCIENTIFIC, INC. v. DR. RHETT DRUGGE et al
Filing
20
OPINION. Signed by Judge John Michael Vazquez on 5/25/17. (DD, )
Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
CANFIELD SCIENTIFIC, INC.,
Plaintiff
Civil Action No. 16-4636
v.
MELANOSCAN,
DRUGGE,
LLC
AND
DR.
RHETT
OPINION
Defendants.
John Michael Vazguez, U.S.D.J.
The present matter comes before the Court on the motion of Defendants Melanoscan, LLC
(“Melanoscan”) and Dr. Rhett Drugge (collectively, “Defendants”) to dismiss Counts Two through
Five of the Complaint for failure to state a claim. Plaintiff Canfield Scientific, Inc. (“Canfield” or
“Plaintiff’) opposes the motion.1
This case concerns allegations that Defendants sent
correspondence to certain members of the dermatological community accusing Plaintiff of
infringing on Defendants’ patent. This motion was decided without oral argument pursuant to
Federal Rule of Civil Procedure 78 and Local Civil Rule 78.1. The Court has considered the
parties’ submissions and grants in part and denies in part Defendants’ motion. Defendants’ motion
is granted as to Counts Two and Four and those Counts are dismissed without prejudice. The
motion is also granted as to the allegations concerning the two July 15, 2016 letters (the “July 15
‘Defendants’ brief in support of its motion to dismiss the Complaint will be referred to hereinafter
as “Def. Br.” (D.E. 15); Plaintiffs opposition to Defendants’ motion to dismiss will be referred to
“P1. Opp’n” (D.E. 16); and Defendants’ reply brief in further support of its motion will be referred
to hereinafter as “Def. R.Br.” (D.E. 19).
Letters”) in Counts Three and five and those allegations are likewise dismissed without prejudice.
As to the June 18, 2016 email (the “June 18 Email”) allegations in Counts Three and five, the
motion is denied and those counts shall remain with respect to the June 18 Email only.
I.
BACKGROUND2 & PROCEDURAL HISTORY
Defendant Melanoscan is the owner of Patent No. 7,359,748 (“the ‘748 Patent”), titled
“Apparatus for Total Immersion Photography.” Compl.
¶ 11. Defendant Drugge is the inventor
of the ‘74$ patent and the founder ofMelanoscan. Id. ¶ 4. The ‘74$ Patent “relates to the detection,
diagnosis and treatment of skin cancer.”
Def. Br. Ex. 1.
Specifically, the whole-body
photographic imaging system was “a substantial advancement in improving public health by
automating the imaging of potentially cancerous lesions in a more rapid and complete method.”
Id.
Canfield is “a global leader in imaging systems, services, and products for scientific
research and healthcare applications.” Compl.
¶ 2. Among its products, Canfield develops,
manufactures, and sells an imaging system called Vectra WB360. Id.
¶ 13. Canfield’s customers
for Vectra WB360 include Memorial Sloan Kettering Cancer Center (“M$K”) in the United States
and Princess Alexandria Hospital (“PAH”) in Australia. Id. Dr. Drugge learned that MSK was
using an imaging system that he believed violated the ‘74$ patent. As a result, he sent the June 1$
Email to Drs. Ash Marghoob and Allan Halpern of MSK and other “Friends and Colleagues,”
2
The facts are derived from Plaintiffs Complaint (D.E. 1) (“Compl.”) as well as the exhibits
attached to Defendants’ motion to dismiss (D.E. 15.4-15.7). When reviewing a motion to dismiss,
the Court accepts as true all well-pleaded facts in the complaint. Fowler v. UPYC Shadyside, 57$
f.3d 203, 210 (3d Cir. 2009). Additionally, a court may consider “documents which are attached
to or submitted with the complaint” as well as “documents that the defendant attaches to the motion
to dismiss
if they are referred to in the plaintiffs complaint and are central to the claim.”
Santomenno ex rel. Jo/ui Hancock Trust v. John Hancock-Life Ins. Co. (US.A,), 768 F.3d 284, 29091 (3d Cir. 2014). The exhibits relied on are the June 16 Email and the July 17 Letters.
.
.
.
2
which consisted of doctors and institutions in the dermatological field. Id.
¶J
15-17 (listing
numerous doctors and institutions to whom the June 18 Email was sent). The June 18 Email in
relevant part stated the following:
Sloan Kettering’s scanner pictured in the attachment to this email is
violating the intellectual property behind by [sic] dear Melanoscan,
Total Immersion Photography
This clear violation of my
property rights is a sad reflection on the moral basis of leadership of
Sloan Kettering.
I find it profoundly disgraceful that this act of
intellectual property theft has occurred within our community.
I
think that you should cease immediately in your use of my device as
it violates my patent.
.
.
.
.
.
.
.
Def. Br. Ex. 2.
Although the June 18 Email does not mention Canfield or its product, Canfield alleges that
the scanner in the attachment was its Vectra WB360. In addition, prior to the June 18 Email,
“[MSK] ha[d] issued a purchase order for a Vectra WB360 to be built at Canfield’s facility in New
Jersey and for delivery and installation at [MSK’s] facility in Basking Ridge, New Jersey.” Id.
¶
20. The Complaint does not indicate whether MSK actually went forward with the purchase.
Similarly, if the purchase did not occur, the Complaint is silent as to why it did not.
Subsequently, on July 15, 2016, Mark D. Giarrantana, an attorney for Defendant
Melanoscan, sent the July 15 Letters to Canfield and PAH, respectively, accusing Canfield of
infringing the ‘748 Patent and requesting that PAH to refrain from obtaining “any further
VECTRA Whole Body 360 ‘total body imaging’ or like systems from Canfield” (the “July 15
Letters”). Id.
¶J
21, 22; Def. Br. Exs. 3 & 4.
Plaintiff contends that “the statements and
representations made by Dr. Drngge and Mr. Giarrantana are false, objectively baseless, were
made in bad faith, and were intended to injure Canfield’s relationships with its actual and
prospective customers, and its business and reputation.” Compl.
3
¶ 25.
Based on the June 18 Email and the July 15 Letters, Plaintiff filed its Complaint on August
1, 2016. D.E. 1. The Complaint alleges five causes of action: (1) Declaratory Judgement of Non
Infringement of the ‘748 Patent as to Melanoscan only;3 (2) Tortious Interference with Contractual
and Prospective Business Advantage; (3) Unfair Competition under the Lanham Act
U.S.C.
§ 43(a)
—
15
§ 1125(a); (4) Commercial Disparagement under New Jersey Common Law; and (5) Unfair
Competition under New Jersey Common Law. Id. In lieu of answering, Defendants moved to
dismiss Counts Two through Five of the Complaint, D.E. 15, which Plaintiff opposed, D.E. 16.
II. STANDARD OF REVIEW4
Rule 12(b)(6) of the federal Rules of Civil Procedure permits a defendant to move to
dismiss a count for “failure to state a claim upon which relief can be granted[.]” To withstand a
motion to dismiss under Rule 12(b)(6), a plaintiff must allege “enough facts to state a claim to
relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A
complaint is facially plausible when there is enough factual content “that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). Although the plausibility standard “does not impose a probability
requirement, it does require a pleading to show more than a sheer possibility that a defendant has
Each of the other Counts (two through five) is asserted against all Defendants.
The Court notes that in Plaintiffs opposition it spends two and one-half pages discussing the
pleading standard for a motion to dismiss, but fails to mention the key requirement that a complaint
must be “plausibly pled.” Compare P1. Opp’n at 2-4 with Twombly, 550 U.S. 570 (requiring
allegations to be plausibly pled). Instead, Plaintiff discusses the “fair notice” standard and
describes the Supreme Court’s ruling in Twombly as having “expressly left much of the existing
pleading standards intact.” P1. Opp’n at 3. This is not an accurate recitation of the current pleading
standard under Rule 8. See Tyco Fire Prod. LP v. Victaulic Co., 777 F. Supp. 2d 893, 895 (E.D.
Pa. 2011) (noting that the Supreme Court’s decisions in Twombly and Iqbal “have caused a sea
change in the pleading practices in federal court.”) (emphasis added).
4
acted unlawfully.” Connelly v. Lane Const. Corp., 809 f.3d 780, 786 (3d Cir. 2016) (internal
quotation marks and citations omitted). Plaintiffs plausible allegations must “allege sufficient
facts to raise a reasonable expectation that discovery will uncover proof of [hisi claims.” Id. at
789.
In evaluating the sufficiency of a complaint, a district court must accept all factual
allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.
Phillips v. Cly. of Allegheny, 515 f.3d 224, 231 (3d Cir. 2008).
A court, however, is “not
compelled to accept unwarranted inferences, unsupported conclusions or legal conclusions
disguised as factual allegations.” Baraka v. McGreevey, 481 F.3d 187, 211 (3d Cir. 2007).
III. DISCUSSION
The June 18 Email and the July 15 Letters form the factual predicate for Counts Two
through Five. The Court will first review the email and two letters before turning to the actual
counts.
First, the June 18 Email was sent by Dr. Drugge to a number of hospitals and practitioners,
accusing MSK of infringing on his device. Def. Br. Ex. 2. Nowhere in the email does Dr. Drugge
mention Canfield nor does he mention the Vectra W3360 or any other Canfield product.
Additionally, he implies (if not outright claims) that MSK, not Canfield, stole his product.
Specifically, as to Drs. Marghoob and Halpern of MSK, Dr. Drugge states: “You seek to be the
inventors? Clearly you are the copycats.” Id. at 2. A reasonable interpretation of this statement is
that Dr. Drugge believed it was MSK (through Dr. Marghoob and Dr. Halpern) who had copied
his device at the time he wrote the June 18 Email.
This interpretation is buttressed by other statements made in the email.
Dr. Drugge
indicates that “Sloan Kettering ‘s scanner pictured in the attachment to this email is violating the
5
intellectual property behind my dear MelanoscanTM, Total Immersion Photography.” Id. at 1.
(emphasis added). Drugge goes on to state that “Halpern and Marghoob
[] both visited and
inspected the Melanoscan in person.” Id. (emphases added). Drugge then adds, “Allan (Halpern)
and Ash (Marghoob) why have you chosen to work in the shadows of collegiality through illegal
infringement of my patent? Think of how much further down the field we should have been for
our patients sake had you chosen to collaborate 10 years ago?
.
.
.
Is it that you need more
reputation?” Id. at 1-2. Again, the reasonable conclusion is that Dr. Drugge believes that the two
MSK physicians improperly used his patented work because both had seen a form of the product
a decade before.
Dr. Drugge posits that the two physicians should have been working in
conjunction with him to develop a better product.
Plaintiff claims that Dr. Drugge was referring to it when he mentioned “commercial forces”
behind M$K’s Dermatology Department.
P1. Opp’n at 16.
While Plaintiffs conclusion is
possible, it is not plausible. Dr. Drugge later explains in the email that MSK is working with “IBM
to exploit your dataset.” Def. Br. Ex. 2. at 2. The only commercial force mentioned, besides
the inherent profit motive in conducting such tests, is IBM. Canfield finally argues that given that
the July 17 Letters reference their product; the June 16 Email was also referencing the Vectra
WB360. P1. Opp’n at 14-15. The laws ofphysics, however, betray this argument. If the attorney’s
letters had preceded the email, then a reasonable and logical inference certainly would be that Dr.
Drugge knew of both Canfield and its product when he wrote the email. But since the letters were
written a month after the email, the same reasonable inference is not available, absent a time
machine.
In sum, while it is possible that Dr. Drugge knew that MSK was using Canfield’s product
when he wrote the June 18 Email, it is not a plausible conclusion to draw based solely on the
6
contents of the email itself. And Canfield relies solely on the email to support its contention that
Dr. Drugge knew of, and was referring to, the Vectra WB360 when he wrote the email. Canfield
therefore fails to plausibly plead that Dr. Drugge was referring to Canfield is his June 18 Email.
See Twornbty, 550 U.S. 570. To properly plead such a claim, Canfield will need to allege
additional facts demonstrating that Dr. Drugge was aware that MSK was using Canfield’s product
when he sent the July 18 Email.
Turning to the July 15 Letters, the first letter was sent from Defendants’ attorney to
Plaintiff. While Plaintiff refers to the “July 15 Letters” as plural, it does not provide any analysis
as to how a letter from Melanoscan’s attorney to Plaintiff could support its claims. Additionally,
as Defendants point out, Canfield does not dispute Defendants’ argument that this letter cannot
form the bases of Counts Three and Five. See Def. R.Br. at 13 n.5. Therefore, the Court will not
consider this letter in its analysis.
The second July 15 letter (the “July 15 PAH Letter”) was sent from Defendants’ attorney
to PAH, a customer of Canfield’s. Plaintiff has provided the Court no case law in which a
notice/warning letter from an attorney supports Canfield’s claims. Nonetheless, the Court will
analyze the following claims in regards to the June 18 Email and the July 15 PAH Letter.
Plaintiff takes great liberty in its Complaint with respect to the content of the June 18 Email.
When quoting from the email in its Complaint, Plaintiff selectively quotes, resulting in the
implication that Dr. Drugge directly referred to Canfield’s Vectra WB360. See Compl. ¶j 18-20.
For example, Plaintiff states that “Dr. Drugge expresses his intent to ‘publically serve notice
throughout the dermatology community’ that the Canfield Vectra WB360 in use at Sloan Kettering
‘is violating the intellectual property’ behind his ‘74$ patent.” Id. J 18 (quoting June 18 Email).
This allegation, however, is not supported by the actual content of the email itself See ALA, Inc.
v. CCAIR, Inc., 29 F.3d 855, 859 n.8 (3d Cir. 1994) (“Where there is a disparity between a written
instrument annexed to a pleading and an allegation in the pleading based thereon, the written
instrument will control.”).
7
Count Two
—
Tortious Interference
In Count Two, Plaintiff brings a claim for tortious interference with contractual and
prospective business advantage. Compl.
¶J 33-39. Specifically, Plaintiff alleges that “Canfield
has customer relationships with Memorial Sloan Kettering Cancer Center in New York and
Princess Alexandria Hospital in Australia.”
Id.
¶
34.
Additionally, Plaintiff has “further
prospective business relationships with those customers and with many individuals copied on Dr.
Drugge’s ‘public announcement’ accusing Canfield’s products of infringement.” Id. Plaintiff
states that Defendants, knowing of these relationships, “intentionally and without justification
interfered with Canfield’s current and prospective business relationships by making objectively
baseless, bad faith allegations of patent infringement against Canfield.” Id. ¶ 37. These allegations
against Canfield, caused “Canfield’s reputation and current and prospective business relationships
[to be] irreparably harmed.” Id.
¶ 39.
Defendants argue that Plaintiff has not alleged that Defendants’ actions caused Canfield to
lose any reasonably anticipated economic benefit. Defendants continue that Canfield has not
plausibly pled that it suffered any damages. Def Br. at 9. Plaintiff responds that it stated each of
the elements for a claim of torfious interference, including that Canfield anticipated delivering four
devices to MSK, however “Defendants’ interference with Canfield’s relationship with Sloan
Kettering intervened.” P1. Opp’n at 5.
To prevail on a claim for tortious interference, a plaintiff must plead “[1] that it had a
reasonable expectation of an economic advantage, [2] which was lost as a direct result of
[defendants’] malicious interference, and [3] that it suffered losses thereby.” Avaya Inc., RP v.
Telecom Labs, Inc., 83$ F.3d 354, 382 (3d Cir. 2016) (quoting Ideal Daiiy Farms, Inc. v. Farmland
$
Daiiy Farms, Inc., 282 N.J. Super. 140, 198-99 (App. Div.
1995)).6
“New Jersey recognizes that
the tortious interference with prospective economic benefit or advantage cause of action is separate
and distinct from tortious interference with an existing contract.” Galicki v. New Jersey, No. 14169, 2016 WL 4950995, at *31 (D.N.J. Sept. 15, 2016). “The primary difference between these
two related torts is the existence of a contract, rather than merely a reasonable expectation of an
agreement.” Id. Thus, to plead a claim for interference with prospective contractual relations, a
claimant must demonstrate a “reasonable probability” of a prospective, rather than actual,
contractual relation. Read v. Profeta, No. 15-2637, 2017 WL 12343$, at *7 (D.N.J. Jan. 11, 2017).
In order to plead that Plaintiff had a reasonable expectation that was interfered with,
Plaintiff “must allege facts that show an existing or prospective economic or contractual
relationship.” Advanced Oral Tee/is., L.L.C. v. Nutres Research, Inc., No. 10-5303, 2011 WL
198029, at *9 (D.N.J. Jan. 20, 2011). The “mere allegation of lost business does not suffice.” Id.
“At a minimum, a plaintiff must
[] at least allege specific prospective contracts that were interfered
with.” Novartis Pharm. Corp. v. Bausch & Lomb, Inc., No. 07-5945, 2008 WL 4911868, at *7
(D.N.J. Nov. 13, 200$) (internal quotation marks omitted). Put another way, a party is required to
plead that “if there had been no interference, there was a reasonable probability that it would have
received the anticipated economic benefits.” Ideal Daiiy Farms, 90 F.3d at 747.
In the instant action, Plaintiff fails to plausibly allege what business or client (or
prospective transaction) was lost as a result of Defendants’ alleged interference.
Complaint is comprised largely of conclusory allegations that “Defendants
6
.
.
.
Plaintif?s
interfered with
Defendants allege that this tort requires five elements, however the Third Circuit has recently
reduced it to three. Id. at 382 n. 26. The substance of the elements has not materially changed, so
the same analysis applies.
9
Canfield’s current and prospective business relationships.” Compi. ¶ 37. The Complaint indicates
that “{MSK] has issued a purchase order for a Vectra W3360 to be built at Canfield’s facility in
New Jersey and for delivery and installation at [MSK’s] facility in Basking Ridge, New Jersey.”
Id.
¶ 20.
However, Plaintiff fails to plead that MSK did not go through with this order, or that
MSK (or any other customer) have since refused to do business with Canfield. Moreover, to the
extent the transaction did not take place, Canfield fails to plead whether it was a result of
Defendants’ alleged tortious actions. The Complaint is similarly silent as to any lost business with
PAH.
Plaintiff additionally pleads that the June 1$ Email was sent to “numerous prospective
customers of Canfield.” Id.
¶
17. However, merely listing the names of those to whom the June
18 Email was sent does not sufficiently plead that Plaintiff lost any of the recipient’s potential
business as a result. See IDT Corp. v. Unlimited Recharge, Inc., No. 11-4992, 2012 WL 405029$,
at *9 (D.N.J. Sept. 13, 2012) (“While [p]laintiffs allege numerous instances where [d]efendants
interfered with [p]laintiffs’ alleged existing contracts, [p]laintiffs fail to allege that this interference
resulted in the loss of a contract or prospective gain.”). To this end, Plaintiff also fails to plausibly
plead that there was a reasonable probability that it would enter into a future business relation with
any of the listed persons or institutions.
The allegations are not sufficient to plead that Defendants caused Canfield to lose any
current or anticipated economic benefit. See Am. Millennium Ins. Co.
first Keystone Risk
Retention Grp., Inc., 332 F. App’x 787, 790 (3d Cir. 2009) (affirming district court’s dismissal of
plaintiffs tortious interference claim when the “complaint fail[ed] to identify a single, specific
customer that [plaintiff] either lost or could have acquired but for {defendants’J conduct”);
Diversified Indus., Inc. v. Vinyl Trends, Inc., No. 13-6194, 2014 WL 1767471, at *5 (D.N.J. May
10
1, 2014) (dismissing a tortious interference counterclaim when “[d]efendant fail[ed] to identify
any actual contract or customer affected by [p]laintiffs alleged misconduct.”); Lucas Indus., Inc.
v. Kendiesel, Inc., No. 93-4480, 1995 WL 350050, at *9 (D.N.J. June 9, 1995) (granting motion to
dismiss where counter-claimant failed to identify “a single customer or a single contract that
[]
was likely to consummate, but failed to consummate, due to the actions taken by [counter-claim
defendant]”)
.
For the same reasons, Plaintiff has not plausibly pled the necessary damages. “Economic
damages are a substantive element of a tortious interference claim.” Graco Inc. v. PMC Global,
Inc., No. 08-1304, 2012 WL 762448, at *17 (D.N.J. Mar. 6, 2012); see also N.J Physicians United
Plaintiff cites to Teva Pharma Indus., Ltd v. Apotex, Inc., No. 07-55 14, 2008 WL 3413 $62 (D.N.J.
200$). There, the court denied the defendant’s motion to dismiss where the plaintiff alleged that
it had a “continuing, economically advantageous relationship with the supply of carvedilol for use
in its carvedilol products” and defendant “knowingly interfered with this relationship by filing
lawsuits for the purpose of barring others from beginning or continuing to supply carvedilol.” Id.
at *9 Thus, the plaintiff alleged that the defendant’s actions restricted its ability to make and sell
its products. The Teva Court noted decisions in this district that “[do] not require a party to identify
a specific prospective customer or contract.” Id. (citing two other cases in this District). The cited
cases do seem somewhat at odds with the majority of opinions previously cited. See, e.g.,
Aleynikov v. Goldman Sachs Grp., Inc., No. 12-5994, 2016 WL 6440122, at *17 & n. 20 (D.N.J.
Oct. 2$, 2016) (dismissing, based on New Jersey precedent, a claim for tortious interference with
prospective economic damage for failing to plausibly plead that defendant knew of the plaintiffs
relationship with a third party and due to the plaintiffs failure to offer facts that it had some
reasonable expectation of financial advantage, while also acknowledging that Teva and a few other
cases did not require that the specific third party be named). Nonetheless, they are distinguishable,
since in those cases, the plaintiff alleged with some particularity the nature of the economic benefit
that plaintiff was wrongfully denied, and that defendant knew of the benefit. Here, it is unclear
that there has been any effect on Plaintiffs contracts, relationships with its customers, or
prospective relationships. Additionally, as discussed, the Complaint does not plausibly plead that
Dr. Drugge knew that MSK was using Canfield’s product when he sent the June 18 Email. Thus,
the Court finds Teva inapposite. Moreover, in Teva, the defendant did not argue that the complaint
failed to allege a specific relationship with a third party, but instead asserted that the complaint did
not provide sufficient notice of the charges. Teva Pharma Inthis., 200$ WL 3413862 at *9 The
court in Teva merely concluded that the complaint placed the defendant on “fair notice of the claim
and the grounds on which it was based.” Id. (citation omitted).
11
Reciprocal Exch. v. Boynton &Boynton, Inc., 141 F. Supp. 3d 298, 310 (D.N.J. 2015). As stated,
Plaintiff has not alleged that it lost any sale, any customer, or any potential customer as a result of
Defendants’ actions.
Instead, the Complaint states in conclusory fashion that “Canfield’s
reputation and current and prospective business relationships have been irreparably harmed by
Defendants’ tortious conduct.” Compi.
¶ 39. Such allegations, without factual support, are not
sufficient to plead damages. Interlink Prod. Int’l, Inc.
HDS Trading Corp., Inc., No. 15-1642,
2015 WL 12840378, at *5 (D.N.J. Oct. 14, 2015) (dismissing a tortious interference claim when
plaintiff only asserted conclusory allegations); Bartone v. NetJets, Inc., No. 11-8, 2011 WL
2532497, at *7 (D.N.J. June 24, 2011) (dismissing a tortious interference claim where the
complaint lacked the factual support necessary for damages). Therefore, as pled, the Complaint
does not plausibly state a claim for tortious interference with current or prospective business
interests.
Additionally, Defendants argue that Count Two should be dismissed with respect to Dr.
Drugge since Canfield failed to plausibly allege that he knew of any relationship between Canfield
and MSK when he sent the June 18 Email. Def. Br. at 13-18. The Court agrees for the reasons
discussed above. Tortious interference requires Plaintiff to plead that Dr. Drugge intended to cause
injury to Canfield. See Woods Corp. Assocs. v. Signet Star Holdings, Inc., 910 F. Supp. 1019,
1032 (D.N.J. 1995) (“[A] plaintiff seeking to recover for tortious interference [is required] to show
that the defendant specifically intended to interfere with that particular plaintiff.”). Therefore,
Canfield has also failed to plausibly plead the necessary knowledge and intent, or malice element
of tortious interference with respect to Dr. Drugge. Count II is dismissed without prejudice.8
8
Plaintiff additionally asks this Court to take judicial notice of webpages attached to its opposition,
arguing that they are necessary to properly understand references made by Dr. Drugge to the
“International Skin Imaging Collaboration.” P1. Opp’n at 17. Defendant opposes this request.
12
Count four
—
Commercial Disparagement
In Count F our, Plaintiff brings a common law claim for commercial disparagement.
Cornpl.
¶ 46-51.
Plaintiff alleges that Defendants’ false allegations irreparably harmed
“Canfield’s reputation and current and prospective business relationships.” Id.
¶ 51. Additionally,
Plaintiff alleges that “Canfield has suffered a loss of goodwill and mciv suffer lost sales or loss of
prospective contracts with customers,” as a result of Defendants’ actions. Id. (emphasis added).
Defendants argue that Canfield has not sufficiently pled special damages and therefore
cannot sustain a claim of commercial disparagement. Def. Br. at 19-21. Plaintiff responds that
allegations regarding a loss in sales are only required “where a plaintiff fails to identify specific
customers who have been affected by the disparagement.” P1. Opp’n at 18. Plaintiff argues that
since it has alleged that the commercial disparagement affected its relationships with specific
customers, it has adequately pled this claim. Id. at 19.
In order to state claim for commercial disparagement, or trade libel,9 a plaintiff must allege
“(1) publication; (2) with malice; (3) of false allegations concerning his property, product or
business, and (4) special damages, i.e. pecuniary hanm” Nahas v. Shore Med. Ctr., No. 13-6537,
2015 WL 3448021, at *12 (D.N.J. May 29, 2015). Special damages must be in the form of
Def. R.Br. at 4-5. The Court finds it premature to take judicial notice of a website at this stage of
the proceedings. Evidence must be authenticated before it can be admitted, and at this stage, the
Court does not have the information it needs to authenticate the website. See Victautic Co. v.
Tieman, 499 F.3d 227, 236 (3d Cir. 2007) (“Anyone may purchase an internet address, and so,
without proceeding to discovery or some other means of authentication, it is premature to assume
that a webpage is owned by a company merely because its trade name appears in the uniform
resource locator.”). Thus, Plaintiffs request for judicial notice is denied without prejudice.
Moreover, such information is not properly considered in a motion to dismiss. There are
no factual allegations in the Complaint concerning Dr. Drugge’s knowledge of International Skin
Imaging Collaboration or how that information relates to Plaintiffs claim.
Commercial disparagement is also known as trade libel. See Patel v. Soriano, 369 N.J. Super.
192, 246 (App. Div. 2004).
13
pecuniary
740267,
harm and must be pled with particularity. See Intervet, Inc. e. Mileutis, Ltd., 2016 WL
at
*6 (D.N.J. Feb. 24, 2016). Particularity requires alleging either “loss of particular
customers by name, or a general diminution of business, and extrinsic facts showing that such
special damages were the natural and direct result of the false publication.” Nalias, 2015 WL
3448021, at *13.
Here, Plaintiff has not sufficiently pled special damages, either through lost sales from
established or prospective customers or through a general diminution of business.
Plaintiff
provides no particular allegations regarding a diminution of its business nor does it provide any
specific allegations concerning lost sales (or lost potential sales). The Complaint indicates that
Plaintiff has two customers: M$K and PAH. The Complaint further alleges that the recipients of
the June 18 Email, other than MSK, were prospective customers. As noted above, Plaintiffs
allegation that it had contracted with MSK, without more, is insufficient to allege that Canfield
lost any business or suffered damages. The Complaint suffers similar deficiencies as to PAH.
Also, including potential customers on the June 18 Email does not support pecuniary damages as
there is no indication that Canfield had an actual customer relationship with, or a reasonable basis
to believe that it would have a customer relationship with, such persons or institutions. Plaintiff
merely alleges in Count Four that, as a result of Defendants’ actions, it “has suffered a loss of
goodwill and may suffer lost sales or loss of prospective contracts with customers.” Id.
¶
51
(emphasis added). This conclusory allegation is not sufficient to plead special damages with
particularity. See Intervet, 2016 WL 740267, at *6. Therefore, Plaintiff has failed to plausibly
plead a claim for trade libel and Count Four is dismissed without prejudice.
Counts Three and Five
—
Unfair Competition
14
Count Three is a claim for unfair competition pursuant to Section 43(a) of the Lanham Act,
Compi.
¶J 40-45, and Count five is a common law claim for unfair competition. Id. ¶J 52-54.
Plaintiff alleges that “Defendants have made objectively baseless, material false statements
concerning Canfield’s products in a commercial communication.
business relationships with its customers.” Id.
.
.
in an effort to harm Canfield’s
¶ 41.
The Lanham Act, in relevant part, provides that:
(a) (1) Any person who, on or in connection with any goods or
uses in commerce any word, term, name, symbol, or
services
false or misleading
device, or any combination thereof, or any
of fact, or false or misleading representation of fact,
description
which
...
...
(B) in com,nerciat advertising or promotion, misrepresents the
nature, characteristics, qualities, or geographic origin of his or her
goods, services, or commercial activities, shall be liable in a civil
action by any person who believes that he or she is or is likely to be
damaged by such act.
15 U.S.C.
§ 1 125(a)(1)(B) (emphasis added). In order to establish a violation of the Lanham Act,
a plaintiff must allege:
(I) that the defendant has made false or misleading statements as to
his own product [or another’s]; (2) that there is actual deception or
at least a tendency to deceive a substantial portion of the intended
audience; (3) that the deception is material in that it is likely to
influence purchasing decisions; (4) that the advertised goods
traveled in interstate commerce; and (5) that there is a likelihood of
injury to the plaintiff in terms of declining sales, loss of good will,
etc.
Educ. Impact, Inc. v. Danielson, No. 14-937, 2015 WL 381332, at *13 (D.N.J. Jan. 28, 2015).
“The test of unfair competition under New Jersey law is identical to the test for unfair competition
under
§ 1125 of the Lanham Act.” Graco, Inc., 2009 WL 904010, at *27; see also Birthright v.
Birthright Inc., 827 F. Supp. 1114, 1141 (D.N.J. 1993) (holding that since “the test for a common
law unfair competition claim under New Jersey law is essentially the same as under the federal
15
Lanham Act,” the court did not have to undergo a separate analysis under New Jersey common
law). Accordingly, the Court addresses both claims together.
Plaintiff appears to be arguing that Defendants made a false statement about Canfield’s
product, specifically, that it infringes on Defendants’ product. The Court notes that Defendants
do not argue, as they had earlier, that Plaintiff failed to plausibly plead that Dr. Drugge knew that
Canfield was the competitor when he sent the June 18 Email. As a result, the Court will not
consider this point in its analysis as to these counts. Instead, Defendants focus on whether the
June 18 Email constituted commercial speech.1°
A threshold inquiry in a Lanham Act or unfair competition claim “is determining if the
statement was disseminated commercial advertising or promotion.” Svnthes, Inc. v. Emerge Med.,
Inc., No. 11-1566, 2012 WL 4205476, at *31 (E.D. Pa. Sept. 19, 2012). Courts in this District and
others use a four-prong test11 to determine what is considered “commercial advertising or
promotion.” See, e.g., Educ. Impact, Inc., 2015 WL 381332, at * 13; Pactiv Corp. v. Perk- Up, Inc.,
No. 08-05072, 2009 WL 2568105, at *9 (D.N.J. Aug. 18, 2009).
The four elements of a
commercial advertisement or promotion are: “(1) commercial speech; (2) by a defendant in
commercial competition with the plaintiff (3) for the purpose of influencing customers to buy the
defendant’s goods or services; and (4) disseminated sufficiently to the relevant purchasing public
Defendants do argue that the June 18 Email does not mention Canfield or the Vectra WB360,
Def. Br. at 24, but they do so only in the context of their commercial speech argument.
10
The four-prong test was originally set out in Gordon & Breach Science Pttblishers v. Am. Inst.
ofPhysics, 859 F. Supp. 1521, 1537 (S.D.N.Y. 1994). The Third Circuit has not explicitly adopted
this test, but an overwhelming majority of district courts throughout the country have. See, e.g.,
Fdttc. Impact, Inc. V. Danielson, No. 14-937, 2015 WL 381332, at *13 (D.N.J. Jan. 28, 2015)
(describing how “courts in this District and others” apply the four prong test from Gordon &
Breach); Fttturistic Fences, Inc. v. Illusion Fence Corp., 558 F. Supp. 2d 1270, 128 1-82 (S.D. Fla.
2008). Additionally, Plaintiff does not argue against its use. The Court will therefore follow the
other courts in this District and apply the Gordon & Breach four-part test.
16
to constitute advertising or promotion within the industry.” Gordon & Breach Sd. Publishers v.
Am. Inst. ofPhysics, 859 F. Supp. 1521, 1537 (S.D.N.Y. 1994).
Here, Defendants argue that Canfield fails to adequately allege that Dr. Drugge’s
statements in the June 18 Email satisfy the first and third elements.
Def Br. at 21-25.
Additionally, Defendants contend that in respect to the July 15 Letters, Canfield fails to allege
elements one, three, and four. Id. at 26-30. Plaintiff responds that Defendants’ definition of
“commercial speech” is too narrow.
P1. Opp’n at 20-22.
Plaintiff argues that a broader
interpretation is required and that its Complaint sufficiently alleges that the June 18 Email and the
July 15 PAH Letter are commercial speech. Id. at 22-24. Additionally, Plaintiff contends that
both the email and the letter are for the purpose of influencing customers to buy Dr. Drugge’s
device, and that each is disseminated sufficiently as required by the Lanharn Act. Id. at 23-2 6.
As to the first element, “[c]ornmercial speech is ‘speech which does no more than propose
a commercial transaction.” Factiv Corp., 2009 WL 2568105, at *9 (quoting Gordon & Breach
Sci. Publishers, 859 F. Supp. at 1537). At a bare minimum, commercial speech must “target a
class or category of purchasers or potential purchasers, not merely particular individuals.” Mycone
Dental Supply Co. v. Creative Nail Design, Inc., No. 11-4380, 2012 WL 3599368, at *6 (D.N.J.
Aug. 17, 2012). Yet, a more expansive view has defined commercial speech as “an ‘expression
related solely to the economic interest of the speaker and its audience.” Refundo, LLC v. Drake
Enters., Ltd., No. 13-643, 2013 WL 1750016, at *4 (D.N.J. Apr. 22, 2013) (quoting City of
Cincinnati v. Discoveiy Network, Inc., 507 U.S. 410, 422 (1993)).
“To decide whether speech is commercial, a court must determine (1) if it is an
advertisement, (2) if it refers to a specific product or service, and (3) if the speaker has an economic
motivation for the speech.”
Pactiv Corp., 2009 WL 2568105, at *9 (citing US. Healthcare v.
17
Bitte Cross of Gr. Phita., 898 F.2d 914, 933 (3d Cir, 1990)). An “affirmative answer” to all three
questions “provides strong support for the determination that the speech is commercial.” Id.
(internal quotation marks omitted). However, “it is not necessary that each of the characteristics
‘be present in order for speech to be commercial.”
Greater Baltimore Ctr. for Pregnancy
Concerns, Inc. v. Mayor & City Council ofBaltimore, 721 F.3d 264, 285 (4th Cir. 2013) (quoting
Bolgerv. Young Drug Prods. Corp., 463 U.S. 60,67 n.14 (1983)).
The July 15 PAH Letter is a notice and warning letter sent by Melanoscan’s attorney
concerning the potential infringement of his client’s product. Courts agree that such letters, or
cease and desist letters, are not commercial speech and thus cannot form the basis of an unfair
competition claim. See Fittttristic Fences, Inc. v. Illusion Fence Corp., 558 F. Supp. 2d 1270,
128 1-82 (S.D. Fla. 200$) (concluding that “a patent holder has the right to send cease and desist
letters for the purpose of discontinuing allegedly infringing activity without subjecting the patentee
to liability under the Lanharn Act”); li Eagles Toot Warehoutse, Inc. v. Fisher Tooling Co., No.
97-1568, 2007 WL 979854, at *16 (D.N.J. Mar. 30, 2007) (finding that “infringement notices”
sent by defendant’s attorney to plaintiff’s customers warning them of plaintiffs potential
infringement and directing them to discontinue the sale of plaintiffs product did not constitute
“commercial advertising” under the Lanham Act); Conditioned Ocular Enhancement, Inc. v.
Bonaventitra, 45$f. Supp. 2d 704, 710 (N.D. Ill. Oct.17, 2006) (ruling that cease and desist letters
patent holder sent to alleged infringer’s current and prospective customers were not “commercial
advertising or promotion” within scope of Lanham Act’s false or deceptive advertising provision).
The July 15 PAH Letter from Defendants’ attorney is a warning and notice letter that (1)
informed PAR of Canfield’s alleged infringement; (2) asked PAR to refrain from obtaining any
further VETRA W3360 from Canfield;’2 and (3) informed PAR that “an entity that induces
another to commit infringement of a U.S. patent may be held liable as an infringer.” Def. Br. Ex.
4. The July 15 PAR Letter cannot form the basis of an unfair competition claim, and, as a result,
the Court dismisses Counts Three and Five to the extent they rely on the letter.
However, Defendants’ argument as to the June 18 Email comes up short. While the email
is not an advertisement, it does refer to Melanoscan’s product. See Pacth’ Corp., 2009 WL
2568105, at *9•
Additionally, Dr. Drugge touts his device as being “of enormous value in
uncovering melanoma,” which can reasonably be interpreted as satisfying the economic
motivation requirement. Id. Since two of three elements for commercial speech have been met,
and an advertisement is not required, the Court finds Plaintiff has plausibly pled that the June 18
Email is commercial speech when viewing the facts in a light most favorable to Plaintiff’3
Defendants also argue that Canfield has failed to allege that the June 18 Email was sent
“for the purpose of influencing customers to buy defendant’s goods or services.”
“Courts
Plaintiff again mischaracterizes the content of this letter in its brief. Specifically, Plaintiff states
that the letter “insists” that PAR refrain from obtaining any further VETRA WB360 devices from
Canfield and “makes false and baseless threats” to “compel compliance with its demand.” P1.
Opp’n at 24. In reality, the July 15 PAR Letter asks for PAR to refrain from obtaining any
additional Canfield “VECTRA Whole body 360 ‘total body imaging’ or like systems” pending the
resolution of the infringement dispute. Def Br. Ex. 4. Plaintiffs allegation that the July 15 PAR
Letter demands that PAR stop using Canfield’s product is, at best, erroneous. In addition, the
Court catmot find any “false and baseless threats” in the letter. To be sure, the letter puts PAR on
notice and warns the hospital of ramifications for improper conduct under the law, but the Court
can find nothing false in the July 15 PAH Letter. Obviously, Canfield disagrees with the letter’s
statement that its product is infringing (hence, Count One in this suit) but that disagreement does
not make the statement false. There is absolutely no evidence that Melanoscan believed that
Canfield was not infringing but nevertheless sent the letter in bad faith.
12
The Court is aware that the June 18 Email is not a typical commercial solicitation and that it
addresses at length MSK’s alleged intellectual property violation. However, at the motion to
dismiss stage (and giving Canfield the benefit of all reasonable inferences), the Court cannot
conclude as a matter of law that the email is not commercial speech at this time.
19
interpreting this element have been clear in requiring the involvement of a ‘customer’ or
‘consumer’ as those terms are generally understood.” Cancer Genetics, Inc. v. Hartrnayer, No.
07-5463, 2008 WL 323738, at *10 (D.N.J. Feb. 5, 200$). In the June 1$ Email, Dr. Drugge touts
his product, while stating that the MSK scanner is a “copycat.” Dr. Drugge claims that his device
has been “of enormous value in uncovering melanoma[.]” He further adds that “[t]ens of thousands
of high risk melanoma patients have been scanned by the Melan[o] scan.”
at least one current customer of Canfield’s
—
This email was sent to
MSK. In addition, Dr. Drugge indicates that he is
publicly serving notice on the “dermatology community.” Given the recipient list, this statement
can also reasonably be interpreted as having a purpose to influence the dermatological community
to use the Melanoscan. Dr. Drugge touts his product, the tens of thousands of patients who have
used it, and the product’s efficacy. Again, viewing the facts in the light most beneficial to Plaintiff,
the email could be read as encouraging its recipients to use the Melanoscan system instead of the
allegedly infringing product. Thus, at this stage, the Court will deny Defendants’ motion to
dismiss Counts Three and Five as to the June 18 Email only.
IV. CONCLUSION
In sum, the Court GRANTS IN PART AND DENIES IN PART Defendants’ motion.
Defendants’ motion is granted as to Counts Two and Four and those Counts are dismissed without
prejudice. The motion is also granted as to the allegations concerning the July 15 Letters in Counts
Three and Five and those allegations are likewise dismissed without prejudice. As to the June 18
Email allegations in Counts Three and Five, the motion is denied and Counts Three and Five shall
remain with respect to the June 18 Email only. Plaintiff has thirty (30) days to file an amended
20
complaint, if it so chooses, and in accordance with Local Civil Rule 15.1.’ An appropriate Order
accompanies this Opinion.
Date: May 25, 2017
JOhN MICHAEL Z’UEZ
UNITED STATES DIST’JCT JUDGE
14
Effective May 10, 2017, Local Civil Rule 15.1 states, in part, that:
A party who files an amended pleading in response to an Order
authorizing the filing of that pleading to cure a defect in its pleading
shall file:
(1) a copy of the amended pleading, complete with a handwritten or
electronic signature; and
(2) a form of the amended pleading that shall indicate in what
respect(s) it differs from the pleading that it amends, by
bracketing or striking through materials to be deleted and
underlining materials to be added.
21
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