ONTEL PRODUCTS CORPORATION v. ZURU LTD. et al

Filing 16

MEMORANDUM AND ORDER that Defendants' 8 Motion to Dismiss is denied. Signed by Judge Peter G. Sheridan on 10/4/2017. (mps)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

ONTEL PRODUCTS CORP.,
Plaintiff,
v.
ZURU LTD., and ZURU, INC.,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)

Civil Action No:
17-cv-3658 (PGS)(LHG)

MEMORANDUM
AND
ORDER

This matter comes before the Court on Defendants Zuru LTD and Zuru, Inc.’s (collectively,
“Zuru”) Motion to Dismiss Plaintiff Ontel Products Corp.’s Complaint for failure to state a claim
pursuant to Fed. R. Civ. P. 12(b)(6) (ECF No. 8). Plaintiff alleges Defendants have engaged in
unfair competition, in violation of the Lanham Act, 15 U.S.C. § 1125(a), and presents common
law claims of unfair competition, tortious interference with a prospective business advantage, and
unjust enrichment. In support of Defendants’ contention that Plaintiff has failed to state a claim,
Defendants rely exclusively on one defense. That is, Defendants argue they are immune from
liability by virtue of the Noerr-Pennington1 immunity doctrine. Because Defendants’ motion is
predicated solely on the Noerr-Pennington immunity, the discussion herein is limited to
Defendants’ Noerr-Pennington immunity argument.

1

E.R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); United Mine
Workers v. Pennington, 381 U.S. 657 (1965).

BACKGROUND
On May 22, 2017, Plaintiff initiated this suit by filing a Complaint in this Court against
Defendants. (ECF No. 1). Plaintiff is a New Jersey-based company that markets and develops
retail products commonly found in large retail stores, such as Toys ‘R’ Us, Walmart, Home Depot,
and Bed Bath and Beyond. (Comp. at ¶ 10). Specifically, Plaintiff markets and distributes a toy
product called “Build Bonanza,” which is “an adhesive backed building block tape” used to
connect LEGO® style blocks. (Id. at ¶ 15).
Defendant Zuru LTD is a Chinese company with its principal place of business in
Guangzhou, China. (Id. at ¶ 3). Zuru, Inc. is a Chinese-based corporation with its principal place
of business in Forked River, New Jersey. (Id. at ¶ 4). According to the Complaint, Defendants
intend to sell and manufacture a product strikingly similar to Build Bonanza, called “Nimuno
Loops,” which is also an “adhesive backed building block tape.” (Id. at ¶ 17). Plaintiff alleges that
Zuru has made false allegations about Ontel to Ontel’s retail partners, in order to “Disrupt Ontel’s
business operations and client relationships.” (Id. at ¶ 20). On May 17, 2017, Plaintiff claims Zuru
met with Walmart representatives and indicated that Zuru had served Plaintiff with a cease and
desist letter, which purportedly threatened legal action against Plaintiff for alleged patent
infringement, and that Walmart should not carry Plaintiff’s product. (Id. at ¶ 22). Zuru allegedly
made similar statements that same day to one of Plaintiff’s international distributors. (Id. at ¶ 25).
The following day, Plaintiff claims that Zuru pressured Toys ‘R’ Us into “back[ing] away” from
its commitment to place Plaintiff’s products in its Back to School catalog. (Id. at ¶¶ 21- 22).
Plaintiff claims it has never received a cease and desist letter. (Id. at ¶ 23). Moreover,
based on a search of the U.S. Patent and Trademark Office records, Zuru has no registered patents

2

or any other patents “under which they had rights related to . . . Ontel’s Product.” (Id. at ¶ 24). As
such, Plaintiff alleges that Zuru’s statements to its retail partners have been “made for the purpose
of jeopardizing Ontel’s business relationships and supplying the products themselves.” (Id. at ¶
26).
Plaintiff brings four causes of action based on federal and state law. Its first two causes
of action allege unfair competition under both federal, 15 U.S.C. § 1125(a), and a New Jersey
statute. It also alleges state tort claims under theories of tortious interference with prospective
economic advantage and unjust enrichment. Defendants contend that all of the Counts of
Plaintiff’s Complaint are barred by the Noerr-Pennington doctrine.
LEGAL STANDARD
On a motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), the
Court is required to accept as true all allegations in the Complaint and all reasonable inferences
that can be drawn therefrom, and to view them in the light most favorable to the non-moving party.
See Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 (3d Cir. 1994). “To survive
a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). While a court will accept well-pleaded
allegations as true for the purposes of the motion, it will not accept bald assertions, unsupported
conclusions, unwarranted inferences, or sweeping legal conclusions cast in the form of factual
allegations. Iqbal, 556 U.S. at 678-79; see also Morse v. Lower Merion Sch. Dist., 132 F.3d 902,
906 (3d Cir. 1997). A complaint should be dismissed only if the well-pleaded alleged facts, taken
as true, fail to state a claim. See In re Warfarin Sodium Antitrust Litig., 214 F.3d 395, 397-98 (3d
Cir. 2000).

3

ANALYSIS
Defendants contend that all the claims alleged should be dismissed since they are barred
by the Noerr-Pennington doctrine. That is, Defendants’ “supposed misrepresentations in letters
and communications concern[ed] enforcement of [their] intellectual property rights,” entitle them
to Noerr-Pennington immunity.
The Noerr-Pennington doctrine arises from anti-trust law, where it allows competitors to
exercise their right to petition legislatures on a common basis. See Allied Tube & Conduit Corp.
v. Indian Head, 486 U.S. 492, 499-501 (1988). “The Noerr-Pennington doctrine . . . protects
citizens from being penalized for exercising their first amendment right to petition the
government.” Carpet Grp. Int’l v. Oriental Rug Imps. Ass’n, 256 F. Supp. 2d 249, 261 (D.N.J.
2003). “Rooted in the First Amendment and fears about the threat of liability chilling political
speech,” the doctrine immunizes private parties, “who attempted to influence government action
– even where the petitioning had anticompetitive effects,” from federal antitrust laws. A.D. Bedell
Wholesale Co. v. Philip Morris Inc., 263 F.3d 239, 250 (3d Cir. 2001). Although the doctrine
originated in the antitrust context, it has been extended on a limited basis “to offer protection to
citizens’ petitioning activities in contexts outside the anti-trust area as well.” We, Inc. v. City of
Philadelphia, 174 F.3d 322, 326-27 (3d Cir. 1999); see also BE & K Const. Co. v. N.L.R.B., 536
U.S. 516 (2002) (applying the doctrine to the National Labor Relations Act); Brownsville Golden
Age Nursing Home, Inc. v. Wells, 839 F.2d 155, 160 (3d Cir. 1988) (doctrine applied to tort liability
for actions based on petitions to the government to shut down a nursing home that was in violation
of various regulations).
Generally, in order to receive Noerr-Pennington immunity, Defendants must have
petitioned the government for redress. See A.D. Bedell, 263 F.3d at 250. For example, A.D. Bedell

4

noted that, “[u]nder the Noerr-Pennington doctrine, ‘[a] party who petitions the government for
redress generally is immune from antitrust liability.’” Id. (citation omitted); see also Cardtoons,
L.C. v. Major League Baseball Players Ass’n, 208 F.3d 885, 893 (10th Cir. 2000) (holding that
“because there was no petition of the government in the present case, the issue of immunity
collapses into the issue of state law liability.”). Moreover, Noerr-Pennington immunity has been
extended to some limited non-traditional petitioning, such as “efforts to influence governmental
action incidental to litigation such as prelitigation threat letters.” A.D. Bedell, 263 F.3d at 252.
Citing A.D. Bedell, Defendants contend their efforts to protect their “extensive intellectual
property rights” entitles them to Noerr-Pennington immunity. In A.D. Bedell, the Third Circuit
was tasked with determining whether defendant tobacco companies were shielded from potential
antitrust liability, since they collectively entered settlement agreements with sovereign states. 263
F.3d at 254. Seeing no reason to differentiate between settlement agreements, and other acts
associated with litigation between the government and private actors, the court held that the
settlement agreement gave rise to immunity since it constituted a “petitioning activity with
sovereign states.” Id. at 252-54.
Here, the Noerr-Pennington doctrine does not apply for several reasons. First, there is no
evidence suggesting that Defendants have petitioned the government for any redress for purported
interference with “intellectual property rights.” Second, while Defendants argue that their cease
and desist requests entitle them to immunity, the Complaint explicitly alleges that these requests
were never actually made, nor has Defendants presented anything to the contrary. Finally,
Defendants have failed to demonstrate how their communications to third-party retailers, regarding
intellectual property rights litigation is akin to a doctrine that protects conduct between competitors
when petitioning government. See Sosa v. DIRECT TV, Inc., 437 F.3d 923, 934-36 (9th Cir. 2006).

5

Therefore, when viewing the record in light most favorable to Plaintiff, the Defendants’ motion to
dismiss pursuant to its Noerr-Pennington immunity is denied.
ORDER
IT IS on this 4th day of October, 2017,
ORDERED that Defendants’ motion to dismiss is DENIED.

s/Peter G. Sheridan
PETER G. SHERIDAN, U.S.D.J.

6