Sulzer Mixpac AG v. DXM Co. Ltd. et al

Filing 115

ORDER granting 108 Motion to Dismiss. For the foregoing reasons, Defendants' motion for judgment on the pleadings is granted as to Counts III through VI of the Complaint and denied as to Counts I, II, and VII. Defendants' motion to va cate the 2016 Consent Injunction and 2020 Preliminary Injunction and to rescing the 2016 Settlement Agreement is denied. Plaintiff's motion to dismiss Counterclaim I is granted, and it is dismissed with prejudice. Plaintiff's motion to dism iss Counterclaim II is granted, and it is dismissed with prejudice, except as to U.S. Trademark No. 4,051,261. Plaintiff's motion to dismiss Counterclaims III and IV are granted with prejudice as to DXM's allegations that Mixpac's clai m of trademark infringement constitutes a sham litigation but dismissed without prejudice as to DXM's allegations that Mixpac illegally attempted to secure and maintain a monopoly by, among other things, attempting to coerce DXM to sign consent judgments. Counterclaim V is dismissed with prejudice. DXM's Affirmative Defense II is stricken as moot except as to U.S. Trademark No. 4,051,261. Mixpac's motion to strike Affirmative Defense VI is granted. The Clerk of the Court shall mark the motions (dkt. nos. 37 and 108) as closed.. (Signed by Judge Loretta A. Preska on 9/15/2022) (ate)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------x
SULZER MIXPAC AG,
:
:
Plaintiff,
:
:
v.
:
:
DXM CO., LTD., and
:
DENTAZON CORPORATION,
:
:
Defendants.
:
----------------------------------------x

19 Civ. 9404 (LAP)
ORDER

LORETTA A. PRESKA, Senior United States District Judge:
Before the Court are the cross-motions of Plaintiff Sulzer
Mixpac (“Mixpac”) and Defendants DXM Co, Ltd. and Dentazon Corp.
(together, “Defendants” or “DXM”).

Defendants move for judgment

on the pleadings, to vacate the 2016 Consent Injunction and 2020
Preliminary Injunction, and to rescind the 2016 Settlement
Agreement.

(See Defendants’ Memorandum in Support of Motion

(“Mot.”), dated December 13, 2021 [dkt. no. 108].)1

For its

part, Plaintiff moves to dismiss all of Defendants’
counterclaims and two of Defendants’ affirmative defenses.

(See

Plaintiff opposed (Plaintiff’s Memorandum of Law in Opposition
(“Opp.”), dated January 3, 2022 [dkt. no 109]); Defendants
submitted a reply (Defendants’ Reply Memorandum of Law
(“Reply.”), dated January 18, 2022 [dkt. no. 110]); and
Plaintiffs submitted a sur-reply (Plaintiff’s Sur-Reply to
Defendants’ Reply (“Sur-reply.”), dated February 1, 2022 [dkt.
no. 113]).
1

Plaintiff’s Memorandum of Law in Support of Motion to Dismiss
(“MTD”), dated January 17, 2020 [dkt. no. 38]).2
I.

Background
A.

Procedural History

Mixpac is the manufacturer of a proprietary system for twopart mixing adhesives for dental applications. (Complaint
(“Compl.”), dated October 10, 2019 [dkt. no. 1] ¶ 12.)

One

component of that system is a mixing tip that mixes the
materials that together constitute the dental adhesive used in
certain procedures. (Id.)

Mixpac has manufactured these mixing

tips for over 20 years and has historically produced them in a
variety of distinctive colors. (Id. ¶¶ 13-14.) Those colors-described by Mixpac and by Defendants as “the Candy Colors”-include yellow, teal, blue, pink, purple, and brown. (Id. ¶ 15.)
Because the Candy Colors indicate that Mixpac is the
manufacturer of the dental tips (id.), Mixpac has sought and
obtained many U.S. Trademark Registrations for the various Candy
Colors (id. ¶ 18; see also Answer and Counterclaims
(“Countercl.”) ¶ 8, dated December 2, 2019 [dkt. no. 25].)
These registrations cover use of the Candy Colors on various

Defendants opposed (Memorandum in Opposition to Plaintiff’s
Motion to Dismiss Counterclaims and Defenses (“MTD Opp.”), dated
January 31, 2020 [dkt. no. 42]); and Plaintiff replied
(Plaintiff’s Reply Memorandum of Law in Support of Motion to
Dismiss (“MTD Reply.”), dated February 7, 2020 [dkt. no. 46]).
2

2

products, including mixing tips with a “dome-shaped” lower
portion (Compl. Ex. B), mixing tips without the “dome-shaped”
lower portion (Compl. Ex. C), and “mixing material cartridge
caps” (Compl. Ex. D).
In 2015, Mixpac sued Defendants for producing and selling
mixing tips that allegedly infringed Mixpac’s trademarks in the
Candy Colors, see Sulzer Mixpac AG v. DXM Co. Ltd., No. 15 Civ.
9359 (ER) (S.D.N.Y.).

The parties resolved that lawsuit through

a confidential settlement agreement (the “2016 Settlement
Agreement”)3 and a parallel consent judgment that permanently
enjoined Defendants from selling the products that allegedly
infringed Mixpac’s Candy Colors trademarks.

See Consent

Judgment and Permanent Injunction (“2016 Consent Judgment”),
dated June 16, 2016 [dkt. no. 47 in 15 Civ. 9359].
Despite the 2016 Settlement Agreement and the 2016 Consent
Judgment, however, Mixpac alleges that it subsequently became
aware that Defendants reverted to producing, marketing, and
selling allegedly infringing mixing tips.

(Compl. ¶¶ 45-54.)

Hence, Mixpac brought the present lawsuit against Defendants for
breach of the 2016 Settlement Agreement, enforcement of the 2016
Consent Injunction, statutory and common law trademark
infringement, trademark counterfeiting, false design origin, and

3

The 2016 Settlement Agreement is filed under seal.
3

unfair competition.

(Id. ¶¶ 60-107.)

On July 2, 2020, the

Court granted Mixpac’s motion for a preliminary injunction
barring Defendants from the sale, distribution, or advertising
of mixing tips bearing the Candy Colors (the “2020 Preliminary
Injunction”).

See Sulzer Mixpac AG v. DXM Co., Ltd., No. 19

Civ. 9404 (LAP), 2020 WL 3619047, at *6 (July 2, 2020).

As to

likelihood of success on the merits, the Court concluded that
“Mixpac has demonstrated a likelihood of success on the merits
on its claim for breach of the 2016 Settlement Agreement.”

Id.

As part of the 2016 Settlement Agreement, Defendants
generally agreed not to challenge the validity of Mixpac’s Candy
Colors trademarks unless Mixpac brought an action against
Defendants in connection with products different from those at
issue in the 2015 litigation.
B.

(Settlement Agreement ¶ 9.)

The Present Motions
1.

Defendants’ Motion for Judgment on the Pleadings

According to Defendants, the Second Circuit’s decision in a
different case involving Mixpac’s Candy Colors--Sulzer Mixpac AG
v. A&N Trading Co., 988 F.3d 174 (2d Cir. 2021), cert. denied
142 S. Ct. 1359 (2022)--compels judgment in their favor.

In A&N

Trading Co., the Court of Appeals reversed the decision of the
district court and held that certain of Mixpac’s Candy Colors
trademarks to color-code mixing tips by size are functional and
thus not protectable under Trademark law.
4

Id. at 183 (“We thus

conclude that the colors are functional, rendering Mixpac’s
trade dress unprotectable.”)

Defendants argue that

since the Plaintiff’s Candy Color Trademark
rights asserted against Defendants largely
overlap with and use the same color-coding
system as the Candy Color Trademark rights
asserted against A&N, it follows that all of
the former rights are also effectively
invalid. Indeed, all of Plaintiff’s trademark
rights which use Candy Colors to color-code
mixing tips and related products . . . are
effectively invalid.
(Mot. at 2.)
More specifically, as to Counts III through VII, which
sound in trademark infringement and related causes of action,
Defendants argue that because the Candy Colors marks are
functional, “there are no rights which can be found to be
infringed and these Counts should be dismissed as a matter of
law.”

(Id. at 3.)
As to Counts I and II, which allege breach of the 2016

Settlement Agreement and the 2016 Consent Injunction, Defendants
argue that the agreement and injunction “are premised on the
validity of” Mixpac’s Candy Colors rights and “[n]ow that
Plaintiff’s Candy Color Trademark Rights have been found to be
functional and thus effectively invalid, the entire legal
foundation for Counts I and II has collapsed” such that “[i]t
would be inequitable to continue to enjoin Defendants . . .

5

where third parties including A&N are free to use the Candy
Colors.”

(Id.)
2.

Defendants’ Motion to Vacate the 2016 Consent
Injunction and 2020 Preliminary Injunction

Beyond arguing that A&N Trading Co. requires dismissal of
Counts I and II of the complaint, Defendants move to vacate
pursuant to F.R.C.P 60(b)(5)-(6) the 2016 Consent Injunction and
2020 Preliminary Injunction on the basis that A&N’s holding that
the Candy Color marks are functional renders the injunctions so
inequitable and unfair as to constitute an extraordinary
circumstance warranting vacatur.

(Mot. at 11-14.)

Defendants

argue that the 2016 Settlement Agreement similarly should be
rescinded pursuant to equitable principles.
3.

(Id.)

Plaintiff’s Motion to Dismiss Defendants’
Counterclaims and Affirmative Defenses

Prior to the Court of Appeals’ decision in A&N Trading Co.,
Defendants asserted counterclaims for a declaration of noninfringement, declaration of functionality of the Candy Colors
feature, violation of the antitrust law, unfair competition, and
interference with business relations.

(Countercl. at 19-23.)

Defendants also asserted affirmative defenses, including,
as relevant here, the invalidity of Plaintiff’s trademarks and
unclean hands on the part of Plaintiff.

(Id. at 14-15.)

Plaintiff argues that several of the counterclaims and
affirmative defenses are barred by res judicata because they are
6

the same as counterclaims previously asserted and dismissed with
prejudice by virtue of the 2016 Consent Judgment.

(MTD at 3-9.)

As to the antitrust, unfair competition, and tortious
interference counterclaims, Plaintiff argues alternatively that
these claims should be dismissed for failure to state a claim.
(Id. at 10-13.)

As to Counterclaim I--Defendants’ counterclaim

for a declaration of non-infringement--Plaintiff argues that the
claim should be dismissed as a mirror image of Plaintiff’s
claims of infringement.
II.

(Id. at 13.)

Discussion
A.

Defendant’s
Pleadings

Motion

for

Judgment

on

the

“The standard for granting a Rule 12(c) motion for judgment
on the pleadings is identical to that for granting a Rule
12(b)(6) motion for failure to state a claim.”

Lively v. WAFRA

Inv. Advisory Grp., Inc., 6 F.4th 293, 302 (2d Cir. 2021)
(cleaned up).

“To survive a Rule 12(c) motion, [the

plaintiff’s] complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible
on its face.”

Id. (cleaned up).

“The assessment of whether a

complaint's factual allegations plausibly give rise to an
entitlement to relief . . . calls for enough fact[s] to raise a
reasonable expectation that discovery will reveal evidence of
illegal conduct.”

Id.

“In making this assessment, [the Court]

7

draw[s] all reasonable inferences in the plaintiff's favor.”
Id.

“Judgment on the pleadings is not appropriate if there are

issues of fact which if proved would defeat recovery, even if
the trial court is convinced that the party opposing the motion
is unlikely to prevail at trial.”

Id. at 302.

“Thus, where a

question of fact is in dispute, it is improper for the district
court to answer it on a motion for dismissal on the pleadings.”
Id.
1.

Counts III-VI

Counts III through VI of the complaint allege statutory and
common law trademark infringement, trademark counterfeiting, and
false design origin.

(Compl. at 17-20.)

Registered trademarks are presumptively valid but remain
subject to proof of “any legal or equitable defense or defect”
and “shall be subject to” the defense that “[t]he mark is
functional.”

15 U.S.C. § 1115(a)-(b).

See Ezaki Glico

Kabushiki Kaisha v. Lotte Int'l Am. Corp., 986 F.3d 250, 256 (3d
Cir.), as amended (Mar. 10, 2021) (“Even after a mark is
registered, it is a defense to infringement ‘[t]hat the mark is
functional.’” (quoting 15 U.S.C. § 1115(b)(8)).

Indeed, one

“who asserts trade dress protection has the burden of proving
that the matter sought to be protected is not functional.”
U.S.C. § 1125(a)(3).

8

15

“[A] product feature is considered to be functional in a
utilitarian sense if it is (1) essential to the use or purpose
of the article, or if it (2) affects the cost or quality of the
article.”

Sulzer Mixpac AG v. A&N Trading Co., 988 F.3d 174,

182 (2d Cir. 2021) (cleaned up).

“Product features are

essential when they are dictated by the functions to be
performed by the article.”

Id.

“A feature affects cost or

quality when it permits the article to be manufactured at a
lower cost or constitutes an improvement in the operation of the
goods.”

Id.

“A feature can still be functional even if it is

not essential to a product's use or purpose and does not affect
a product's cost or operation.

This is referred to as aesthetic

functionality, where the aesthetic design of a product is itself
the mark for which protection is sought.”

Id.

Defendants argue that Mixpac is estopped under the doctrine
of defensive non-mutual collateral estoppel from arguing that
Defendants infringed Mixpac’s Candy Color marks in light of the
Second Circuit’s decision in A&N, which held that the Candy
Color marks are functional and thus not protected under
Trademark law.

Cf. Blair v. Alstrom Transportation, Inc., No.

16 Civ. 3391 (PAE), 2020 WL 4504842, at *5 (S.D.N.Y. Aug. 5,
2020) (granting motion for judgment on the pleadings as to
patent claims where patents at issue were canceled).

9

“When a motion to dismiss is premised on the doctrine of
collateral estoppel, a court is permitted to take judicial
notice of and consider the complaints and the record generated
in both actions without having to convert the motion to dismiss
into a summary judgment motion.”

Peralta v. St. Lukes Roosevelt

Hosp., No. 14 Civ. 2609 (KPF), 2015 WL 3947641, at *1 n.1
(S.D.N.Y. June 26, 2015) (cleaned up).

“In general, collateral

estoppel applies when (1) the identical issue was raised in a
previous proceeding; (2) the issue was actually litigated and
decided in the previous proceeding; (3) the party had a full and
fair opportunity to litigate the issue; and (4) the resolution
of the issue was necessary to support a valid and final judgment
on the merits.”

MMA Consultants 1, Inc. v. Republic of Peru,

245 F. Supp. 3d 486, 518 (S.D.N.Y.), aff'd, 719 F. App'x 47 (2d
Cir. 2017).
Here, this test is met.

First, the issue of whether

Mixpac’s Candy Color marks are functional and thus not protected
under Trademark law was raised in A&N.

A&N Trading Co., 988

F.3d at 177 (“A&N argues on appeal that Mixpac’s use of
particular colors on mixing tips is functional because the
colors serve as a color-coding scheme that signifies the size of
a mixing tip.”).
Second, the issue was actually litigated in the district
court and before the Court of Appeals, which concluded that “the
10

record evidence establishes that Mixpac’s use of colors on their
mixing tips affects their quality by identifying the mixing
tip’s diameter, rendering the trade dress functional.”

Id. at

184.
Third, a party has a full and fair opportunity to litigate
an issue if it was “fully able to raise the same factual or
legal issues assert[ed in the prior proceeding].”
Whitman, 300 F.3d 256, 274 (2d Cir. 2002).

LaFleur v.

There is little

doubt that Mixpac was fully able to raise the legal issue of
whether the use of colors on its mixing tips rendered the trade
dress functional.

The fact that DXM was not a defendant in the

A&N case does not change the reality that Mixpac had a full and
fair opportunity to litigate this issue.
Fourth, and finally, “final judgment includes any
prior adjudication of an issue in another action that is
determined to be sufficiently firm to be accorded conclusive
effect.”
1997).

Wolfstein v. Docteroff, 133 F.3d 210, 216 (3d Cir.

Mixpac’s argument against the finality of the the Court

of Appeals’ decision in A&N relied principally on its then
pending petition for a writ of certiorari from the U.S. Supreme
Court.

(Opp. at 10.)

However, the Supreme Court has since

denied Mixpac’s petition, confirming the finality of the A&N
decision.

See A&N Trading Co., 988 F.3d 174 (2d Cir. 2021),

cert. denied, 142 S. Ct. 1359 (2022).
11

Moreover, even if

Mixpac’s petition for writ of certiorari was not denied, pending
appellate review would not preclude the application of
collateral estoppel.

See Life Technologies, Inc. v. Promega

Corp., 189 F.R.D. 334, 339 (D. Md. 1999).
Indeed, Plaintiff does not seriously press in its papers
that its claims as to the Candy Color marks should survive
Defendants’ motion for judgment as a matter of law once the A&N
decision became final.

(See Opp. at 10-11.)

Plaintiff instead

argues that the motion should be denied because at least one of
the trademarks alleged to have been infringed involves a “right
in the dome shape without color that are not impacted by the A&N
Decision.”

(Opp. at 10.)

Defendants agree, noting that its

motion “does not include Plaintiff’s U.S. Trademark No.
4,051,261 on its dome shape, non-color mixing top, which is the
only non-color trademark in this case.”

(Reply. at 8-9.)

Accordingly, Mixpac is estopped from relitigating the
functionality of the Candy Color marks that were actually and
finally litigated in A&N.

Defendants’ motion for judgment on

the pleadings is granted in part as to Counts III through VI,
and these counts are dismissed with prejudice except as to U.S.
Trademark No. 4,051,261.
2.

Count VII

Count VII of the complaint alleges common law unfair
competition.

“[T]he essence of unfair competition under New
12

York common law is the bad faith misappropriation of the labors
and expenditures of another."

Jeffrey Milstein, Inc. v. Greger,

Lawlor, Roth, Inc., 58 F.3d 27, 34 (2d Cir. 1995) (cleaned up);
see also Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037,
1044 (2d Cir. 1980) ("The essence of an unfair competition claim
under New York law is that the defendant has misappropriated the
labors and expenditures of another. . . .

Central to this

notion is some element of bad faith.”).
Although Defendants list Count VII as one of the counts of
the Complaint on which they seek judgment as a matter of law,
Defendants’ papers contain no citation to any case involving
unfair competition and Defendants do not make any specific
argument as to why the A&N decision compels judgment in their
favor.

Accordingly, Defendants have not met their burden of

establishing that judgment should be entered in their favor as a
matter of law on Count VII.
3.

Counts I-II

The majority of the parties’ briefing on Defendants’ motion
for judgment on the pleadings relates to Counts I and II, which
allege breach of the 2016 Settlement Agreement and the 2016
Consent Injunction.

(Compl. at 15-17.)

Defendants argue that

the agreement and injunction “are premised on the validity of”
Mixpac’s Candy Colors rights and “[n]ow that Plaintiff’s Candy
Color Trademark Rights have been found to be functional and thus
13

effectively invalid, the entire legal foundation for Counts I
and II has collapsed” such that “[i]t would be inequitable to
continue to enjoin Defendants . . . where third parties
including A&N are free to use the Candy Colors.”

(Mot. at 3.)

Plaintiff counters that the settlement and consent injunction
“have nothing to do with the validity of Mixpac’s Candy Colors.”
(Opp. at 5 (emphasis omitted).)
The Court agrees that the agreement and injunction are not
premised on the validity of Mixpac’s Candy Colors marks.
Neither the agreement nor the consent injunction mention
functionality, and neither includes as a condition to their
enforceability or validity the existence of trademark rights in
the underlying Candy Colors marks.

See S.E.C. v. Conradt, 309

F.R.D. 186, 188 (S.D.N.Y. 2015) (“Relief under Rule 60(b) is not
intended to allow one side of a settlement agreement to obtain
the benefits of finality while placing the other side at risk
that future judicial decisions will deprive them of the benefit
of their bargain.

When it comes to civil settlements, a deal is

a deal, absent far more compelling circumstances than are here
presented.”).

Defendants argue that the Conradt decision is

inapposite because unlike in that case, “the vitality of the
2016 Settlement Agreement and the [2016 Consent Judgment] was
based 100% on the validity of the Color Trademarks” and was “the

14

sine qua non of those instruments.”

(Reply. at 4-5.)

But

again, the Court disagrees.
A deal is a deal, and while the Court of Appeals’ decision
in A&N forecloses Plaintiff's claims sounding in infringement as
to those marks actually litigated and decided in that case, it
does not provide a basis for vacating or rescinding the parties’
“calculated settlement” in the prior litigation between these
parties.

See United States v. Bank of N.Y., 14 F.3d 756, 760

(2d Cir. 1994); W.L. Gore & Assocs., Inc. v. C.R. Bard, Inc.,
977 F.2d 558, 563 (Fed. Cir. 1992) (denying a Rule 60(b) motion
where, although the party might now be at a disadvantage with
respect to other competitors of the plaintiff, “both parties
understood [the deal] at the time of settlement” and “the
parties each gave up something they might have won had they
proceeded with the litigation”).
The 2016 Settlement Agreement, for example, includes eight
“whereas” clauses, setting forth the parties’ mutual
understandings in entering into the agreement.

None of those

clauses states that the parties understood the trademarks at
issue to be valid or non-functional.

And while the parties

could have included language elsewhere in the agreement
providing that some or all of its terms would extinguish upon a
finding of trademark invalidity or functionality, the parties
did not do so.

Or, in the alternative, Defendants had the
15

option not to settle but instead to litigate their functionality
claims to conclusion.

(See Answer, Affirmative Defenses and

Counterclaims of Defendants DXM Co., Ltd. and Dentazon
Corporation, Counterclaim II, dated March 21, 2016 [dkt. no 26
in 15 Civ. 9359].)

But they declined to pursue that option and

instead made a deal.

To repeat:

a deal is a deal.

Hence, Defendant’s motion for judgment on the pleadings as
to Counts I and II is denied.
B.

Defendants’ Motion to Vacate the 2016 and 2020
Injunctions and to Rescind the 2016 Consent Judgment

Plaintiff moves pursuant to the F.R.C.P. 60(b) and its
equitable powers to vacate the injunctions and to rescind the
2016 Settlement Agreement.
Rule 60(b) provides that a “court may relieve a party . . .
from a final judgment, order or proceeding” where, inter alia,
“applying it prospectively is no longer equitable” or for “any
other reason that justifies relief.”

A Rule 60(b) motion is

“generally not favored and is properly granted only upon a
showing of exceptional circumstances.”

Marrero Pichardo v.

Ashcroft, 374 F.3d 46, 55 (2d Cir. 2004) (cleaned up).

“The

burden of proof is on the party seeking relief from judgment.”
Id. at 55 (cleaned up).

“The Second Circuit has imposed a

three-prong test in order for a Rule 60(b) motion to prevail:
First, there must be ‘highly convincing’ evidence supporting the

16

motion; second, the moving party must show good cause for
failing to act sooner; and third, the moving party must show
that granting the motion will not impose an undue hardship on
the other party.”

PG 1044 Madison Assocs., L.L.C. v. Sirene

One, L.L.C., 229 F.R.D. 450, 452 (S.D.N.Y. 2005) (cleaned up).
“Rule 60(b) cannot be used to avoid the consequences of a
party’s decision to settle the litigation or to forego an appeal
from an adverse ruling.”

Sampson v. Radio Corp. of Am., 434

F.2d 315, 317 (2d Cir. 1970).
Defendants argue that continuing to enforce the 2016
Settlement Agreement, the 2016 Consent Injunction, and the 2020
Preliminary Injunction “would be inequitable because Plaintiff’s
Candy Color Trademark Rights on which the Agreement and
Injunctions are premised have been found to be functional and
thus effectively invalid.”

(Mot. at 12.)

Although it is true

that the Candy Color marks have been found to be functional and
thus effectively invalid, it does not follow from that that the
injunctions and the Settlement Agreement must therefore be
vacated.

As discussed, the 2016 Settlement Agreement and

related 2016 Consent Injunction were not premised on an
understanding that the Candy Colors marks were valid.

And the

2020 Preliminary Injunction in this case is not based on the
likelihood of success of Plaintiff’s claim that Defendants
infringed Plaintiff’s mark; it is based on the Court’s finding
17

that Plaintiff is likely to succeed on its claim that
Defendants’ alleged distribution of a new product line violates
the 2016 Settlement Agreement.
Accordingly, Defendants’ motion to vacate the injunctions
is denied for lack of any exceptional circumstances, and
Defendants’ motion to rescind the 2016 Settlement Agreement is
similarly denied.
C.

Plaintiff’s Motion to Dismiss Defendant’s
Counterclaims and Affirmative Defenses
1.

Counterclaim I - Declaration of Non-Infringement

With respect to Counterclaim I, which seeks a declaration
of non-infringement, Mixpac argues that this claim fails because
it is a “mirror image” of its infringement claim in Count III of
the Complaint.

(See MTD at 13.)

Under Federal Rules of Civil

Procedure Rule 12(f), “[t]he court may strike from a
pleading . . . any redundant . . . matter.”
12(f).

Fed. R. Civ. P.

“In determining whether a counterclaim is merely a

mirror image of a claim, the court must consider whether a case
or controversy would still exist in connection with the
counterclaim if the court entered a judgment dismissing the
opponent’s claim.”

Worldwide Home Prods., Inc. v. Bed Bath and

Beyond, Inc., No. 11 Civ. 03633, 2013 WL 247839, at *2 (S.D.N.Y.
Jan. 22, 2013).

18

The Court above largely granted DXM’s motion for judgment
on the pleadings with regard to Mixpac’s infringement claims.
That is tantamount to the declaration of non-infringement that
DXM seeks.

DXM’s argument that this counterclaim should

nevertheless survive because it raised multiple grounds for noninfringement is uncompelling because following this Court’s
judgment on the merits it can face no future threat of trademark
infringement from Mixpac as to the Candy Color marks.

Compare

Larson v. General Motors Corporation, 134 F.2d 450, 453-54 (2d
Cir. 1943) (finding counterclaims unsustainable following a
judgment on the merits because the defendants faced no future
threat of litigation, and thus, no case or controversy existed
in connection with the defendant's counterclaim), with
Orientview Techs. LLC v. Seven For All Mankind, LLC, No. 13 CIV.
0538 PAE, 2013 WL 4016302 (S.D.N.Y. Aug. 7, 2013) (“Were the
case to be dismissed short of a ruling on the merits, 7FAM would
remain vulnerable to liability on the same claims.

Thus, a case

or controversy would still exist in connection to the
counterclaim.”).
Defendants argue in the alternative that dismissal of its
counterclaim seeking a declaration of non-infringement will
leave a cloud over its operations due to a potential voluntarily
dismissal by Mixpac.

This argument is similarly uncompelling.

Defendants need not fear future claims of trademark infringement
19

as to the Candy Colors marks in light of this decision and the
A&N decision.

The only “cloud” that remains over Defendants’

operations with respect to the Candy Color marks is the
continued effect of the 2016 Settlement Agreement, 2016 Consent
Injunction, and 2020 Preliminary Injunction.

Thus, Counterclaim

I is dismissed as a mirror image of Count III of the Complaint.
2.

Counterclaim II – Declaration of Functionality

Counterclaim II alleges functionality of the Candy Color
marks.

(Countercl. at 19.)

Because Mixpac’s infringement

claims are dismissed in light of the the Court of Appeals’
decision in A&N, which held that the majority of the trademarks
at issue in this case are functional and thus not trademarkable,
this counterclaim is dismissed as moot except as to U.S.
Trademark No. 4,051,261.
3.

Counterclaims III-V

Counterclaims III through V allege violations of antitrust
law, unfair competition, and interference with business
relations.

(Countercl. at 19-23.)

Plaintiff raises two

separate theories in moving to dismiss these counterclaims.
Plaintiff first argues that these counterclaims are barred by
res judicata because they are the same as counterclaims
dismissed with prejudice in the 2015 litigation.

(MTD at 3-9.)

Plaintiff then argues in the alternative that these
counterclaims should be dismissed for failure to state a claim
20

on which relief can be granted.

(Id. at 10-13.)

The Court will

address each ground for dismissal in turn.
a.

Counterclaims III-V are Not Barred by Res
Judicata

The doctrine of res judicata applies when “(1) the previous
action involved an adjudication on the merits, (2) the previous
action involved the [parties] or those in privity with them
[and] (3) the claims asserted in the subsequent action were, or
could have been, raised in the prior action.”
266 F.3d 78, 91 (2d Cir. 2001).

Pike v. Freeman,

“[C]ourts must be mindful that

a claim ‘arising subsequent to a prior action . . . is not
barred by res judicata’ even if the new claim is ‘premised on
facts representing a continuance of the same course of
conduct.’”

TechnoMarine SA v. Giftports, Inc., 758 F.3d 493,

499 (2d Cir. 2014) (quoting Storey v. Cello Holdings, L.L.C.,
347 F.3d 370, 383 (2d Cir. 2003)).
Here, DXM’s Counterclaims III through V are premised on
facts representing a continuance of the same course of conduct
which Mixpac engaged in prior to 2016.

DXM now seeks to

introduce post-2016 evidence to demonstrate that the Candy
Colors are functional.

(MTD Opp. at 13.)

Mixpac’s arguments

that DXM previously alleged improper enforcement of trademark
registrations and pointed to customer demand are unconvincing
because they do not account for the fact that DXM’s current

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allegations involve conduct prior to 2016 coupled with conduct
subsequent to 2016.

See TechnoMarine, 758 F.3d at 502 (holding

that infringement claim is not barred by res judicata because
new instances of infringement had occurred after the
settlement); see also Lawlor v. Nat’l Screen Serv. Corp., 349
U.S. 322, 327-28 (1955) (“That both suits involved essentially
the same course of conduct is not decisive.

Such a course of

conduct . . . may frequently give rise to more than a single
cause of action.”).

Mixpac’s argument that DXM has breached the

settlement agreement and therefore cannot rely on it is
similarly unconvincing.

See Pena-Barrero v. City of New York,

2017 WL 1194477 (S.D.N.Y. March 20, 2017) (“[N]either res
judicata nor the Settlement Agreement bars plaintiff from
pointing to pre-settlement events as evidence to support his
post-settlement claims.”).

The terms of the 2016 Settlement

Agreement, which the Court held above remains binding on DXM,
anticipated the present scenario in which Mixpac asserted a
claim against DXM for later alleged infringement, and it
includes express terms permitting DXM to assert any and all
defenses and counterclaims in response to such a claim for
infringement.

Thus, res judicata does not bar DXM’s

counterclaims III through V.

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b.

Counterclaims III and IV are Dismissed
Without Prejudice

The Court now turns to Mixpac’s alternative argument that
Counterclaims III through V should be dismissed pursuant to
Federal Rule of Civil Procedure 12(b)(6) for failure to state a
claim on which relief can be granted.

With regard to

Counterclaim III alleging violation of antitrust laws and
Counterclaim IV alleging unfair competition, Mixpac points to
the Noer-Pennington doctrine of immunity from antitrust
litigation, which states that “plaintiffs cannot incur antitrust
liability for instituting a lawsuit unless the litigation is a
sham.”

De Beers LV Trademark Ltd. v. DeBeers Diamond Syndicate

Inc., No. 4 Civ. 4099 (DLC), 2005 WL 1164073, at *9 (S.D.N.Y.
May 18, 2005).

To qualify as a sham, litigation must be

“objectively baseless in the sense that no reasonable litigant
could realistically expect success on the merits.”

Id.

“A

‘reasonable belief that there is a chance that a claim may be
held valid upon adjudication’ provides an absolute defense
precluding a finding of an antitrust violation.”

Id. (quoting

Prof’l Real Estate Investors v. Columbia Pictures, 508 U.S. 49,
60 (1993)).
Here, DXM fails to demonstrate that Mixpac’s assertion of
its Candy Color marks was objectively baseless.

DXM alleges

that Mixpac’s claims are objectively baseless because “neither

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Mixpac nor any reasonable person in Mixpac’s position, could
assert in good faith infringement of marks . . . which are known
to be functional.”

(Countercl. at 21.)

To the contrary, at the

time of this motion Mixpac had received (1) a trademark
registration from the USPTO, (2) consent and default judgements
against DXM, and (3) a recent trial decision affirming that its
enforcement of this trademark was valid against A&N.

This

repeated affirmation of Mixpac’s right to enforce its Candy
Color Marks is more than sufficient to establish that it could
reasonably expect success on the merits--even if that
expectation ultimately was undermined by the Court of Appeals’
decision in A&N.

“Because it is clear even at this early stage

of the litigation that defendants will be unable to show that
the plaintiffs’ trademark claims are objectively baseless, this
is an appropriate case for the application of Noerr-Pennington
immunity.”

De Beers LV Trademark Ltd. at *10.

Thus,

Counterclaims III and IV are dismissed with prejudice as to
DXM’s allegations that Mixpac’s claim of trademark infringement
constitutes a “sham litigation.”

Counterclaims III and IV are

dismissed without prejudice as to DXM’s allegations that Mixpac
“has illegally attempted to secure and maintain a monopoly” in
the relevant market by “attempt[ing] to coerce [DXM] to sign
Consent Judgments.”

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c.

Counterclaim V is Dismissed With Prejudice

Counterclaim V alleges interference with business
relations.

Defendants contend that Mixpac contacted eBay to

flag DXM and Dentazon’s color-coded mixing tip products as
“counterfeits” and “infringements.”

(Countercl. at 22-23.)

These products were subsequently delisted from eBay, and
Defendants have been unable to obtain a relisting for these
products.

(Id.)

To state a claim for interference with business relations,
a party must allege that “(1) it had a business relationship
with a third party; (2) the defendant knew of that relationship
and intentionally interfered with it; (3) the defendant acted
solely out of malice or used dishonest, unfair, or improper
means; and (4) the defendant’s interference caused injury to the
relationship.”

Lombardo v. Dr. Suess Enters., LP, No. 16 Civ.

9974, 2017 WL 1378413, at *4 (S.D.N.Y. April 7, 2017).

To plead

the third element of “improper means,” a party must allege
conduct that “(1) amounts to a crime or independent tort; (2)
was done for the sole purpose of injuring [claimant]; or (3)
constitutes ‘extreme,’ ‘unfair,’ and ‘egregious’ behavior.”
Darby Trading Inc. v. Shell Intern. Trading and Shipping Co.
Ltd., 568 F. Supp. 2d 329, 348 (S.D.N.Y. 2008).

“Courts

routinely apply the Noerr-Pennington doctrine when assessing

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tortious interference claims.”

Lewin v. Richard Avedon Corp.,

2015 WL 3948824, at *27 (S.D.N.Y. June 26, 2015).
Here, DXM fails adequately to plead that Mixpac used
improper means in its contact with eBay.

Defendants allege that

Mixpac “contacted eBay and asserted that DXM’s and Dentazon’s
color-coded mixing tip products were ‘counterfeits’ and
‘infringements’ of Mixpac’s products and trademark
registrations.”

(Countercl. at 22-23.)

However, “[a] trademark

owner is entitled to advise others of his trademark rights,
[and] to warn others that they or others are or may be
infringing his rights.”

Radiancy, Inc. v. Viatek Consumer

Prods. Group. Inc., 138 F. Supp. 3d 303, 328 (S.D.N.Y. 2014).
Defendants do not allege any conduct beyond this mere
“contacting” of eBay, and they do not allege that the purpose of
this contact was to injure DXM or that Mixpac’s conduct amounted
to an independent crime or tort.

Thus, Counterclaim V is

dismissed with prejudice for failure to state a claim.
4.

Affirmative Defenses II and VI
a.

Affirmative Defense II

Defendants’ Second Affirmative Defense claims that
Plaintiff’s infringement claims are barred because the Candy
Color features of Plaintiff’s trademarks are functional.
(Countercl. at 14.)

As detailed above, Mixpac’s infringement

claims are dismissed in light of the the Court of Appeals’
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decision in A&N, which held that the majority of the trademarks
at issue in this case are functional and thus not trademarkable.
Thus, this affirmative defense is stricken as moot except as to
U.S. Trademark No. 4,051,261.
b.

Affirmative Defense VI

Defendants’ Sixth Affirmative Defense claims that the
equitable relief sought by Plaintiff is barred by its unclean
hands.

(Countercl. at 15.)

Plaintiff Mixpac moves to dismiss

this defense on the grounds that DXM does not allege what acts
constitute unclean hands.

To survive a motion to dismiss for

failure to state a claim upon which relief can be granted, a
party must plead “only 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).
DXM fails to meet this standard.

In asserting this

affirmative defense, DXM merely states that “[t]he equitable
relief sought by Plaintiff is barred by its unclean hands.”
(Countercl. at 15.)

DXM does not even go so far as to identify

which specific conduct has left Plaintiff with “unclean hands.”
Furthermore, Plaintiff pointed out this deficiency in its
memorandum in support of its motion to dismiss counterclaims and
affirmative defenses.

(MTD. at 9-10.)

Despite being alerted to

this deficiency by Plaintiff’s memorandum, DXM did not clarify

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this ambiguity in its opposition memorandum.

Thus, Plaintiff’s

motion to dismiss Affirmative Defense VI is granted.
III. Conclusion
For the foregoing reasons, Defendants’ motion for judgment
on the pleadings is granted as to Counts III through VI of the
Complaint and denied as to Counts I, II, and VII.

Defendants’

motion to vacate the 2016 Consent Injunction and 2020
Preliminary Injunction and to rescing the 2016 Settlement
Agreement is denied.
Plaintiff’s motion to dismiss Counterclaim I is granted,
and it is dismissed with prejudice.

Plaintiff’s motion to

dismiss Counterclaim II is granted, and it is dismissed with
prejudice, except as to U.S. Trademark No. 4,051,261.
Plaintiff’s motion to dismiss Counterclaims III and IV are
granted with prejudice as to DXM’s allegations that Mixpac’s
claim of trademark infringement constitutes a sham litigation
but dismissed without prejudice as to DXM’s allegations that
Mixpac illegally attempted to secure and maintain a monopoly by,
among other things, attempting to coerce DXM to sign consent
judgments.

Counterclaim V is dismissed with prejudice.

DXM’s Affirmative Defense II is stricken as moot except as
to U.S. Trademark No. 4,051,261.

Mixpac’s motion to strike

Affirmative Defense VI is granted.

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The Clerk of the Court shall mark the motions (dkt. nos. 37
and 108) as closed.
SO ORDERED.
Dated:

New York, New York
September 15, 2022

__________________________________
LORETTA A. PRESKA
Senior United States District Judge

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