ThermoLife International LLC v. American Fitness Wholesalers LLC, No. 2:2018cv04189 - Document 25 (D. Ariz. 2019)

Court Description: ORDER granting Defendant American Fitness Wholesaler's 16 Motion to Dismiss pursuant to Rule 12(b)(1) for lack of standing. IT IS FURTHER ORDERED granting Plaintiff leave to amend its complaint. Plaintiff must file a First Amended Complaint within thirty (30) days of the date of this Order. If Plaintiff does not file its First Amended Complaint within thirty (30) days, then the Clerk of Court will dismiss this case without further notice and enter judgment accordingly. IT IS FURTHER ORDERED that Defendant American Fitness Wholesaler's request for attorney's fees (contained in its Motion to Dismiss (Doc. 16 )) is DENIED. Signed by Senior Judge James A Teilborg on 8/15/19. (CLB)

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ThermoLife International LLC v. American Fitness Wholesalers LLC 1 Doc. 25 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 ThermoLife International LLC, Plaintiff, 10 11 v. 12 American Fitness Wholesalers LLC, 13 No. CV-18-04189-PHX-JAT ORDER Defendant. 14 15 Pending before the Court is Defendant American Fitness Wholesalers LLC’s 16 (“Defendant”) Motion to Dismiss (Doc. 16) pursuant to Federal Rules of Civil Procedure 17 (“Rules”) 12(b)(1), 12(b)(6), and 9(b). (Doc. 16). The Court now rules on Defendant’s 18 motion. 19 I. BACKGROUND 20 The Complaint (Doc. 1) asserts the following causes of action: (i) False and 21 Deceptive Advertising in violation of the Lanham Act; (ii) Unfair Competition; (iii) False 22 Patent Marking; and (iv) Civil Conspiracy. (Doc. 1 at 56–64). 23 A. Facts 24 The following facts are either undisputed or recounted in the light most favorable to 25 the non-moving party. See Wyler Summit P’ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 26 661 (9th Cir. 1998). Plaintiff ThermoLife International, LLC (“Plaintiff”) is an Arizona- 27 based company founded in 1998. (Doc. 1 at 5). Plaintiff “currently holds 23 separate and 28 distinct patents that protect its innovative development and use of ingredients in Dietary Dockets.Justia.com 1 Supplements and food products.” (Id.). Plaintiff “both licenses its patented technology for 2 use in Dietary Supplements, specifically Sports Nutrition Supplements, and sells 3 ingredients . . . for use in Dietary Supplements.” (Doc. 19 at 5). “With few exceptions, 4 anytime an amino acid is combined with nitrate(s) and sold and marketed to consumers[,] 5 the product relies on [Plaintiff’s] patented technology.” (Doc. 1 at 5). Plaintiff also licenses 6 and sells its patented creatine nitrate, which is an ingredient in the world’s top-selling pre- 7 workout product: Cellucor’s C4. (Id. at 6). 8 Defendant, which conducts business as A1Supplements, sells dietary supplements 9 to consumers over the internet. (Id. at 7). Defendant places advertisements for each specific 10 product it sells on its website. (Id. at 7–8). Defendant lists “C4,” which includes creatine 11 nitrate sourced and licensed from Plaintiff, as its top selling pre-workout product. (Id. at 12 8). On its website, Defendant also sells creatine nitrate products that have no licensing 13 connection with Plaintiff, including APS Nutrition’s creatine nitrate product, which is 14 advertised as “a vastly superior patented creatine [nitrate].” (Id. at 8–9). 15 Plaintiff alleges that Defendant is unfairly competing in the dietary supplement 16 market through false advertising of products labeled as dietary supplements that contain 17 ingredients the U.S. Food and Drug Administration (“FDA”) labels as “drugs.” (Id. at 8). 18 Plaintiff alleges that 142 products advertised on Defendant’s website contain such 19 ingredients without any disclosure of the nature of the ingredients as “drugs.” (Doc. 19 at 20 7). Every page of Defendant’s website contains the disclaimer, “FDA: these statements 21 have not been evaluated by the Food and Drug Administration. This product is not intended 22 to diagnose, treat, cure, or prevent any disease.” (Doc. 1 at 8). Plaintiff also alleges that 23 Defendant falsely labels products on its website as “patented” when no patent applies to 24 the product. (Id. at 6). 25 II. DISCUSSION 26 Defendant filed the pending Motion to Dismiss (Doc. 16) pursuant to Rule 12(b)(1) 27 for lack of standing, and 12(b)(6) for failure to state a claim upon which relief can be 28 granted. (Doc. 16 at 2–3). Defendant also argues that Plaintiff’s claims sounding in fraud -2- 1 are subject to and fail to meet the heightened pleading requirements of Rule 9(b). (Id. at 2). 2 Because the issue of standing presents a “threshold question of justiciability,” the Court 3 will address the parties’ Rule 12(b)(1) standing arguments first. See U.S. ex rel. Kelly v. 4 Boeing Co., 9 F.3d 743, 747 (9th Cir. 1993). 5 A. 6 Defendant argues that Plaintiff does not have standing under Rule 12(b)(1) to bring 7 Article III Standing its claims. (Doc. 16 at 6). 8 “In essence the question of standing is whether the litigant is entitled to have the 9 court decide the merits of the dispute or of particular issues.” Warth v. Seldin, 422 U.S. 10 490, 498 (1975). In resolving the issue of standing, courts are bound by a constitutionally 11 imposed jurisdictional restraint in Article III of the United States Constitution, which limits 12 the “judicial power” of the United States to the resolution of “cases” and “controversies.” 13 See Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, Inc., 14 454 U.S. 464, 470–71 (1982). Under Rule 12(b)(1), a litigant may seek dismissal of an 15 action for lack of standing because “Article III standing is a species of subject matter 16 jurisdiction.” Carijano v. Occidental Petroleum Corp., 643 F.3d 1216, 1227 (9th Cir. 2011) 17 (citation omitted). To survive a defendant’s motion to dismiss, the plaintiff has the burden 18 of proving jurisdiction. Tosco v. Cmtys. for a Better Env’t, 236 F.3d 495, 499 (9th Cir. 19 2000). To demonstrate Article III standing, a plaintiff must show: “(1) an injury-in-fact, 20 (2) causation, and (3) a likelihood that the injury will be redressed by a decision in the 21 plaintiff’s favor.” Human Life of Wash. v. Brumsickle, 624 F.3d 990, 1000 (9th Cir. 2010) 22 (quotations omitted). This set of requirements makes up the “irreducible constitutional 23 minimum of standing.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). 24 1. False Advertising 25 Plaintiff has the burden of proving standing for “each claim” and “for each form of 26 relief sought.” Daimler Chrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006). All of Plaintiff’s 27 claims are premised on allegations that Defendant falsely advertises products on its 28 website; either by labeling products as dietary supplements when the products contain -3- 1 ingredients that the FDA has labeled “drugs,” or by falsely labeling “creatine nitrate” 2 products sold on its website as patented. (Doc. 1 at 3). Plaintiff alleges in Count I that 3 Defendant’s false advertising violates the Lanham Act. (Id. at 59–60). Plaintiff alleges in 4 Count II that, through Defendant’s false advertising, Defendant unfairly competed in the 5 dietary supplement market. (Id. at 61). Plaintiff alleges in Count III that Defendant violated 6 the false marking statute by falsely advertising products as “patented.” (Id. at 61–62). 7 Finally, Plaintiff alleges in Count IV that Defendant acted in concert with other distributors 8 to engage in false advertising, thus creating a civil conspiracy. (Id. at 63). Because the 9 parties focus their standing arguments on whether Plaintiff sufficiently pleads an injury-in- 10 11 fact from Defendant’s alleged false advertising, the Court will do likewise. a. Injury-in-Fact 12 Defendant asserts that “Plaintiff provides no facts to establish the nature, contours 13 or extent of any injury, when the injury occurred and whether it is ongoing or isolated.” 14 (Doc. 16 at 5). To support its standing argument, Plaintiff claims that it has a unique interest 15 in the dietary supplement market and its business is tied to the general popularity of sports 16 nutrition supplements. (Doc. 19 at 5). Plaintiff argues that it is harmed “when consumers 17 are misled into purchasing any falsely advertised product that competes with any product 18 that contains ingredients that are sourced from [Plaintiff] and/or products that are licensed 19 by [Plaintiff].” (Doc. 1 at 6). As a result, Plaintiff alleges it “suffered, and will continue to 20 suffer damage to its business, reputation and good will and has lost sales and profits that 21 [Plaintiff] would otherwise have made.” (Id. at 60). 22 i. Legal Standard 23 An injury-in-fact is “an invasion of a legally protected interest which is (a) concrete 24 and particularized, and (b) actual and imminent, not conjectural or hypothetical.” Lujan, 25 504 U.S. at 559–60 (citations and quotations omitted). An injury is particularized if it 26 “affect[s] the plaintiff in a personal and individual way,” while an injury is concrete if it is 27 “real, and not abstract.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016) (citations 28 omitted). Determining “injury” for the purpose of assessing Article III standing is a fact- -4- 1 specific inquiry. Lujan, 504 U.S. at 606. 2 Plaintiff “must satisfy the injury-in-fact requirement by alleging that [it] suffered 3 some threatened or actual injury resulting from the putatively illegal action.” Scott v. 4 Pasadena Unified Sch. Dist., 306, F.3d 646, 656 (9th Cir. 2002) (internal quotation marks 5 and citation omitted). Plaintiff may not “rely on a bare legal conclusion to assert injury-in- 6 fact, or engage in an ‘ingenious academic exercise in the conceivable’ to explain how 7 defendants’ actions caused his injury.” Maya v. Centex Corp., 658 F.3d 1060, 1068 (9th 8 Cir. 2011) (citing Chapman v. Pier 1 Imports (U.S.) Inc., 631 F.3d 939, 954–55 (9th Cir. 9 2011) (en banc) (holding that a plaintiff, who did not allege which barriers existed at a store 10 and how the specific barriers impacted his disability, could not establish an injury-in-fact 11 due to a lack of specificity)). 12 “In a false advertising suit, a plaintiff establishes an Article III injury if some 13 consumers who bought the defendant’s product under a mistaken belief fostered by the 14 defendant would have otherwise bought the plaintiff’s product.” TrafficSchool.com v. 15 Edriver Inc., 653 F.3d 820, 825 (9th Cir. 2011) (internal quotation marks omitted). An 16 indication that Plaintiff and Defendant are in “direct competition is strong proof that 17 plaintiffs have a stake in the outcome of the suit, so their injury isn’t ‘conjectural’ or 18 ‘hypothetical.’” Id. at 826 (noting that the plaintiffs “compete with defendants for referral 19 revenue” and thus “[s]ales gained by one are thus likely to come at the other’s expense” 20 (citation omitted)); see also Halicki Films LLC v. Sanderson Sales and Marketing, 547 21 F.3d 1213, 1229 (9th Cir. 2008) (finding an injury-in-fact where plaintiff submitted two 22 expert reports estimating damages in excess of $7 million dollars); All. Labs, LLC v. Stratus 23 Pharm., Inc., No. CV-12-00927-JWS, 2013 WL 273309, at *3 (D. Ariz. Jan. 24, 2013) 24 (concluding there was an injury-in-fact “because [plaintiff] and [defendant] are 25 competitors, and [plaintiff] alleges that it has suffered direct injury because of [defendant’s] 26 trademark infringement and competitive practices with the result being loss of sales and 27 customers”). 28 In the absence of data about lost sales, a plaintiff may allege that it can provide -5- 1 witness testimony or survey material to show that false advertising would influence 2 consumer choice and, therefore, “establish an injury by creating a chain of inferences” that 3 online advertising harmed a plaintiff’s businesses. TrafficSchool.com, 653 F.3d at 825; see 4 also Stahl Law Firm v. Judicate W., No. CV-13-1668-TEH, 2013 WL 6200245, at *5 (N.D. 5 Cal. Nov. 27, 2013) (finding no injury-in-fact where the plaintiff only alleged that it and 6 defendant “compete for legal services,” and that the defendant’s false and misleading 7 advertising “harmed [p]laintiff’s ability to compete”); Obesity Research Inst., LLC v. Fiber 8 Research Int’l, LLC, 310 F. Supp. 3d 1089, 1112 (S.D. Cal. 2018) (noting the first prong 9 of standing is satisfied because a competitor “provide[d] support to show that [the plaintiff] 10 was injured in fact by losing opportunities to expand into the weight loss supplement 11 market”). 12 ii. Analysis 13 Here, Plaintiff and Defendant do not produce competing sources of any ingredient 14 or product. (See generally Doc. 1). Plaintiff patents, licenses, and sells ingredients and 15 technology used in the production of dietary supplements. (Id. at 5–6). Plaintiff asserts that 16 Defendant’s allegedly falsely advertised products compete only with a third party’s product 17 that contains ingredients sourced and licensed from Plaintiff. (See id. at 21, 27, 32, 38, 42, 18 48, 53, 57). Plaintiff does not allege that Defendant holds patents in the dietary supplement 19 market, nor that Defendant manufactures or produces any dietary supplements or 20 ingredients used in dietary supplements. (See id. at 7–9). Rather, Defendant sells and 21 advertises dietary supplements manufactured by third parties on its website. (See id. at 7). 22 While Defendant’s target market is consumers of dietary supplements, Plaintiff competes 23 higher up the supply chain by marketing to production companies who use its patented 24 ingredients and technology to manufacture dietary supplements. (See id.); see also 25 TrafficSchool.com, Inc., 653 F.3d at 827 (labeling a plaintiff and defendant direct 26 competitors because they both market and sell traffic school and driver’s ed courses to the 27 same target market). 28 The only product Plaintiff specifically names as using its patented creatine nitrate is -6- 1 Cellucor’s C4. (See Doc. 1 at 8–9). Cellucor’s C4 is also the only product that Plaintiff 2 attempts to link with a competing product sold on Defendant’s website, namely APS 3 Nutrition’s creatine nitrate product. (See id. at 8). This attenuated link between one product 4 sold by Defendant that contains creatine nitrate sourced from Plaintiff—Cellucor’s C4— 5 and another product sold by Defendant that is not sourced from Plaintiff—APS Nutrition’s 6 creatine nitrate product—does not put Plaintiff and Defendant in direct competition. See 7 Merck Eprova AG v. Brookstone Pharm., LLC, 920 F. Supp. 2d 404, 416 (S.D.N.Y. 2013) 8 (noting that “[the parties] are not direct competitors, insofar as [the plaintiff] does not 9 produce finished consumer products . . .”). Because the parties are not direct competitors, 10 Plaintiff fails to demonstrate that it has a “stake in the outcome of the suit,” which is 11 required to show that its alleged injury is not simply “conjectural or hypothetical.” See 12 TrafficSchool.com, 653 F.3d at 826 (internal quotation marks and citation omitted). 13 Additionally, Plaintiff does not allege any specific facts pertaining to lost sales data. 14 (See generally Doc. 1). Likewise, Plaintiff does not claim that any testimony or survey 15 material exists that could demonstrate Defendant’s alleged false advertising influenced 16 customer choices. (See generally id.). While Plaintiff insinuates that there is competition 17 between Cellucor’s C4 and a third-party’s product that is not sourced from Plaintiff, 18 Plaintiff states that Cellucor’s C4 is “the world’s top-selling pre-workout product.” (Id. at 19 6). Plaintiff also acknowledges that Defendant lists Cellucor’s C4 as the “top-selling Pre- 20 Workout” supplement on its website. (Id. at 8). If anything, these facts undercut any 21 inference that customers are diverted from a “top-selling” product sourced from Plaintiff 22 to a third-party’s competing product. (Compare id. at 6, with id. at 8). Plaintiff does not 23 point to any specific licenses or ingredients for which sales decreased as a result of 24 Defendant’s alleged misconduct. (See generally id.); see also Native American Arts, Inc. 25 v. Speciality Merchandise Corp., 451 F. Supp. 2d 1080, 1082 (C.D. Cal. 2006) (finding 26 that a plaintiff failed to allege an injury-in-fact because it made only conclusory allegations 27 referring to “competitive injury, advertising injury, and other damages,” and did not 28 mention which specific products may have “lost sales” or the extent of such losses (internal -7- 1 quotation marks omitted)). Accordingly, the Court finds that Plaintiff fails to allege a 2 sufficiently concrete and particularized injury. Because a concrete and particularized injury 3 is required to have standing, Plaintiff fails to establish standing under Article III.1 4 B. 5 Alternatively, the Court addresses whether Plaintiff “state[s] a claim upon which 6 relief can be granted” pursuant to Rule 12(b)(6). Fed. R. Civ. P. 12(b)(6). Specifically, 7 Defendant argues that Plaintiff fails to assert an injury that falls within the scope of the 8 statutes under which it brings its express claims. (See Doc. 16 at 14). A finding that a 9 plaintiff is not within the class of entities able to sue under a statute “is effectively the same 10 as a dismissal for failure to state a claim, and a motion to dismiss on this ground is brought 11 pursuant to Rule 12(b)(6), rather than Rule 12(b)(1).” Leyse v. Bank of Am. Nat. Ass’n, 804 12 F.3d 316, 320 (3d Cir. 2015) (internal quotation marks and citation omitted). 13 Alternative Holding: Rule 12(b)(6) 1. Legal Standard 14 “To survive a [Rule 12(b)(6)] motion to dismiss, a complaint must contain 15 sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its 16 face.” Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013) (quoting Ashcroft v. Iqbal, 17 556 U.S. 662, 678 (2009)). “A claim is facially plausible ‘when the plaintiff pleads factual 18 content that allows the court to draw the reasonable inference that the defendant is liable 19 for the misconduct alleged.’” Id. (quoting Iqbal, 556 U.S. at 678). “The plausibility 20 standard requires more than the sheer possibility or conceivability that a defendant has 21 acted unlawfully.” Id. “Where a complaint pleads facts that are merely consistent with a 22 defendant’s liability, it stops short of the line between possibility and plausibility of 23 entitlement to relief.” Id. (quoting Iqbal, 556 U.S. at 678). “[T]he complaint must provide 24 ‘more than labels and conclusions, and a formulaic recitation of the elements of a cause of 25 action will not do.’” In re Rigel Pharmaceuticals, Inc. Securities Litig., 697 F.3d 869, 875 26 (9th Cir. 2012) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “In 27 28 1 Because the Court finds that Plaintiff fails to allege an injury-in-fact, the Court need not analyze the causation and redressability requirements of Article III standing. -8- 1 evaluating a Rule 12(b)(6) motion, the court accepts the complaint’s well-pleaded factual 2 allegations as true and draws all reasonable inferences in the light most favorable to the 3 plaintiff.” Adams v. U.S. Forest Srvc., 671 F.3d 1138, 1142–43 (9th Cir. 2012). “However, 4 the trial court does not have to accept as true conclusory allegations in a complaint or legal 5 claims asserted in the form of factual allegations.” In re Tracht Gut, LLC, 836 F.3d 1146, 6 1150 (9th Cir. 2016). 7 a. Lanham Act (Count I) 8 First, Defendant argues that Plaintiff does not adequately state its false adverting 9 claim under the Lanham Act. (Doc. 16 at 2). The Lanham Act creates two distinct bases of 10 liability: false association under 15 U.S.C. §1125(a)(1)(A), and false advertising under 11 § 1125(a)(1)(B). See Lexmark Int’l, Inc., 572 U.S. at 122. Here, Plaintiff only alleges false 12 advertising. (Doc. 1 at 59–60). A prima facia case for false advertising under the Lanham 13 Act requires a showing that: 14 15 16 17 18 19 (1) the defendant made a false statement either about the plaintiff’s or its own product; (2) the statement was made in commercial advertisement or promotion; (3) the statement actually deceived or had the tendency to deceive a substantial segment of its audience; (4) the deception is material; (5) the defendant caused its false statement to enter interstate commerce; and (6) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to the defendant, or by a lessening of goodwill associated with the plaintiff’s product. 20 Bobbleheads.com, LLC v. Wright Bros., Inc., 259 F. Supp. 3d 1087, 1096–97 (S.D. Cal. 21 2017) (emphasis added). 22 “Additionally, the Lexmark Court determined that a plaintiff seeking to pursue a 23 Lanham Act claim must demonstrate standing beyond the typical Article III requirements.” 24 Id. at 1097 (analyzing, under Rule 12(b)(6), whether the plaintiff’s Lanham Act claim 25 satisfied the additional “standing” requirements regarding the injury plaintiff allegedly 26 suffered (citation omitted)); see also Thermolife Int’l, L.L.C. v. NeoGenis Labs, Inc., No. 27 CV-18-2980-PHX-HRH, 2019 WL 1438293, at *6 (D. Ariz. Apr. 1, 2019) (analyzing 28 under Rule 12(b)(6) whether the same Plaintiff had “standing to bring a Lanham Act false -9- 1 advertising claim” in discussing whether it was in sufficiently close competition with a 2 defendant to suffer an injury).2 3 To meet the additional standing requirements for a Lanham Act false advertising 4 claim, the plaintiff must “fall[] within the ‘zone of interests’ protected by the Lanham Act.” 5 Bobbleheads.com, LLC, 259 F. Supp. 3d at 1097 (quoting Lexmark Int’l, Inc., 572 U.S. at 6 131). The “zone of interest” test is not a particularly demanding one, and the benefit of the 7 doubt goes to the party alleging the cause of action. Lexmark Int’l, Inc., 572 U.S. at 130 8 (citation omitted). “[T]he test forecloses suit only when a plaintiff’s interests are so 9 marginally related to or inconsistent with the purposes implicit in the statute that it cannot 10 reasonably be assumed that Congress authorized the plaintiff to sue.” Id. (internal quotation 11 marks and citation omitted). Nonetheless, “[t]hough in the end consumers also benefit from 12 the Act’s proper enforcement, the cause of action is for competitors, not consumers.” POM 13 Wonderful LLC v. Coca-Cola Co., 573 U.S. 102, 107 (2014). 14 15 The text of the Lanham Act itself identifies the interests protected by the statute. See Lexmark Int’l, Inc., 572 U.S. at 131. Section 45 of the Lanham Act states: 16 The intent of this chapter is to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce; to protect registered marks used in such commerce from interference by State, or territorial legislation; to protect persons engaged in such commerce against unfair competition; to prevent fraud and deception in such commerce by the use of reproductions, copies, counterfeits, or colorable imitations of registered 17 18 19 20 The Court observes that there is a “distinction” identified by the Lexmark Court, “between an adequate allegation of injury-in-fact for [Article III] standing purposes and the question [of] whether that asserted injury fell within the scope of the statute on which the plaintiff was relying (there, the Lanham Act).” Casillas v. Madison Ave. Associates, Inc., 926 F.3d 329, 340 (7th Cir. 2019) (Wood, J., dissenting from denial of en banc consideration (citation omitted)). While courts routinely use the term “standing” when analyzing whether a plaintiff adequately pleads a “commercial or competitive injury” under Rule 12(b)(6)—and, therefore, falls within the scope of the Lanham Act—this Court notes that whether a “plaintiff has been or is likely to be injured” is also an element of the claim that a plaintiff must plead to satisfy Rule 12(b)(6). See, e.g., Bobbleheads.com, LLC, 259 F. Supp. 3d at 1097; NeoGenis Labs, Inc., 2019 WL 1438293, at *5–6. Accordingly, this Court’s analysis is the same regardless of if it analyzes whether Plaintiff pleaded a “commercial or competitive injury,” as required to meet a heightened “standing” requirement of the specific statutes on which it relies, or to satisfy the final element required to state a claim under the Lanham Act, both pursuant to Rule 12(b)(6). 2 21 22 23 24 25 26 27 28 - 10 - 1 2 marks; and to provide rights and remedies stipulated by treaties and conventions respecting trademarks, trade names, and unfair competition entered into between the United States and foreign nations. 3 4 15 U.S.C. § 1127. Therefore, to come within the zone of interests in a suit for false 5 advertising under § 1125(a), a plaintiff must allege that it suffered “an injury to a 6 commercial interest in reputation or sales”, and that injury was proximately caused by 7 Defendant’s actions. Lexmark Int’l, Inc., 572 U.S. at 131–32. i. 8 Direct Competition 9 A commercial or competitive injury is “generally presumed . . . when defendant and 10 plaintiff are direct competitors and defendant’s misrepresentation has a tendency to mislead 11 consumers.” TrafficSchool.com, 653 F.3d at 826; see also ThermoLife Int’l, LLC v. Gaspari 12 Nutrition, Inc., 871 F. Supp. 2d 905, 907 (D. Ariz. 2012), rev’d in part on other grounds, 13 648 Fed. Appx. 609, 616 (9th Cir. 2016) (unpublished) (finding that Plaintiff’s Lanham 14 Act claim survived a Rule 12(b)(6) motion to dismiss where Plaintiff manufactured dietary 15 supplements that were in direct competition with the defendant’s product and Plaintiff 16 alleged direct diversion of sales to the defendant). However, “a court cannot assume injury 17 without any evidence of causality and consumer deception.” Gaspari Nutrition Inc., 648 18 Fed. Appx. at 616 (citing Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197, 209– 19 10 (9th Cir. 1989)). 20 As reasoned herein, Plaintiff and Defendant are not direct competitors. See supra 21 Part II(A)(1)(a)(ii); cf. Gaspari Nutrition Inc., 648 Fed. Appx at 611 (noting “[plaintiff] 22 does not dispute it directly competed with [defendant] in the market for testosterone booster 23 products”). Accordingly, the Court does not presume Plaintiff suffered a commercial 24 injury. TrafficSchool.com, 653 F.3d at 826. 25 ii. Indirect Commercial Injuries 26 However, a plaintiff does not have to be a direct competitor of the defendant to be 27 injured and, therefore, have standing to bring a false advertising claim under the Lanham 28 Act. See Merck Eprova AG, 920 F. Supp. 2d at 416 (finding that a plaintiff suffered an - 11 - 1 injury and had standing as a competitor to bring a Lanham Act claim because “[the parties] 2 both produce competing sources of folate for use in dietary supplements”). When 3 companies are not direct competitors, competitive injuries can still be found where 4 companies are involved in the same market if that involvement puts them within the “zone 5 of interest” of the Lanham Act. See, e.g., Lexmark Int’l, Inc., 572 U.S. at 120–121 (finding 6 that the plaintiff—“the market leader [in] making and selling the components necessary to 7 remanufacture Lexmark cartridges”—met the heightened standing requirements under the 8 Lanham Act to sue the defendant—a manufacturer and seller of laser printers—where both 9 parties utilized microchips that could be used in the defendant’s cartridges). 10 A plaintiff, however, does not adequately plead a claim for damages based on 11 damage to its overall market resulting from a defendant’s alleged conduct. See Skydive 12 Arizona, Inc. v. Quattrochi, No. CV 05–2656–PHX–MHM, 2006 WL 2460595, at *10 (D. 13 Ariz. Aug. 22, 2006) (finding that the plaintiff could not assert a claim based on damage to 14 the skydiving industry as a whole); Joint Stock Society v. UDV North America, Inc., 266 15 F.3d 164, 179 (3rd Cir. 2001) (noting that the plaintiff’s allegations of injury by way of 16 misrepresentations that made the American market for Russian vodka less profitable were 17 too indirect to support its allegations of injury). Conversely, a plaintiff “must allege more 18 than it is the same general business as defendant” and must “allege that it suffered a more 19 direct injury as a result of defendant’s alleged false marking and false advertising” of the 20 products sold on its website. NeoGenis Labs, Inc., 2019 WL 1438293, at *6 (finding it 21 insufficient for a plaintiff to merely claim it was “somehow involved in the Nitric Oxide 22 business and that [products marketed by the defendant] have something to do with the 23 Nitric Oxide business”); see also Thermolife Int’l, L.L.C. v. Compound Solutions, Inc., No. 24 CV-19-1473-PHX-SMM, slip op. at *6 (D. Ariz. July 30, 2019) (finding that the same 25 Plaintiff lacked standing for failure to “allege a competitive injury” under similar 26 circumstances). 27 Here, Plaintiff argues that its involvement in the dietary supplement market is 28 sufficient to plead an injury and confer standing, given that Defendant sells dietary - 12 - 1 supplements. (Doc. 19 at 9–10). Plaintiff alleges it maintains “direct participation and 2 economic interest in the ‘Sports Nutrition’ market and that its business is tied to the success 3 of this market, which is harmed by Defendant’s alleged conduct.” (Doc. 19 at 10). Plaintiff 4 continues that it is harmed “when consumers are misled into purchasing any falsely 5 advertised product that competes with any product that contains ingredients that are 6 sourced from [Plaintiff] and/or products that are licensed by [Plaintiff].” (Doc. 1 at 6). Yet, 7 general harm to the dietary supplement market is an insufficient basis to support a finding 8 of a commercial injury to Plaintiff. See Skydive Arizona, Inc., 2006 WL 2460595, at *10; 9 Joint Stock Society, 266 F.3d at 179. Allegations of harm suffered by companies who 10 purchase Plaintiff’s ingredients or use its technology, or by customers who visit 11 Defendant’s website, are also insufficient to establish a commercial injury to Plaintiff. See 12 Hong Kong Supermarket v. Kizer, 830 F.2d 1078, 1081 (9th Cir. 1987) (holding that a 13 vendor lacked standing to sue on behalf of its customers under Rule 12(b)(6)). 14 Moreover, to allege a plausible commercial injury, a “plaintiff must allege some 15 factual support for its allegations.” NeoGenis Labs, Inc., 2019 WL 1438293, at *6. Instead, 16 Plaintiff alleges that it “suffered, and will continue to suffer damage to its business, 17 reputation and good will and has lost sales and profits that [Plaintiff] would otherwise have 18 made.” (Doc. 1 at 60); see Lexmark Int’l, Inc., 572 U.S. at 134 (stating that a showing of 19 an economic or reputational injury “occurs when deception of consumers causes them to 20 withhold trade from the plaintiff”). Plaintiff, however, does not allege any facts to show 21 that the use of its licensed technology or sales of patented creatine nitrate decreased, when 22 the decrease occurred, where sales were diverted to, or how it correlated with Defendant’s 23 false advertising. (See generally Doc. 1); see also Rogers v. Conair Corp., No. CV-10- 24 1497, 2012 WL 1443905, at *4 (E.D. Pa. Apr. 2, 2012) (holding that a plaintiff’s claim that 25 he “suffered economic damages in the form of lost sales and competitive disadvantage” 26 was a mere legal conclusion and insufficient to allege a competitive injury without pleading 27 specific facts to demonstrate the extent and nature of the alleged loss). 28 Plaintiff also does not allege that companies who use its patented ingredients and - 13 - 1 licensed technology suffered a loss of sales. (See generally Doc. 1); cf. Lexmark Int’l, Inc., 2 572 U.S. at 140 (finding that Plaintiff pleaded an injury and, therefore had standing under 3 the Lanham Act, based in part on an allegation that plaintiff’s remanufacturers sold 10,000 4 fewer refurbished cartridges because of Defendant’s false advertising, and, therefore, “it 5 would follow more or less automatically that [Plaintiff] sold 10,000 fewer microchips for 6 the same reason”). Because Plaintiff does not allege any facts indicating how its sales or 7 reputation may have been or will be affected by Defendant’s alleged conduct, the Court 8 finds that it does not allege a plausible competitive injury. See Bowe Machine Co. v. 9 Superbolt, Inc., No. 13-cv-00008-JAJ-RAW, 2013 WL 12081103, at *10 (S.D. Iowa Dec. 10 20, 2013) (finding no injury where a plaintiff failed to “compare the prices of Defendant’s 11 products and its own or other competitors’ products” or allege that the “[d]efendants’ sales 12 increased as [plaintiff’s] sales decreased”). 13 “The indirectness of the plaintiff’s asserted injury most clearly weighs against 14 standing where the defendant’s misrepresentations injure the plaintiff only by virtue of the 15 intervening acts of some third party.” Harold H. Huggins Realty, Inc. v. FNC, Inc., 643 16 F.3d 787, 799 (5th Cir. 2011); see also Lexmark Int’l, Inc., 572 U.S. at 133–34 (remarking 17 that additional standing requirements under the Lanham Act are “generally not [met] when 18 the deception produces injuries to a fellow commercial actor that in turn affect the 19 plaintiff”). The Court finds that Plaintiff’s conclusory allegations of injury to sales or 20 reputation are not sufficiently supported by alleged facts. See Rogers, 2012 WL 1443905, 21 at *4. Accordingly, Plaintiff fails to adequately allege a commercial or competitive injury 22 and, therefore, did not state a claim upon which relief can be granted under the Lanham 23 Act, pursuant to Rule 12(b)(6).3 24 25 b. False Marking 35 U.S.C. § 292 (Count III) Defendant next argues that Plaintiff fails to adequately plead its false patent marking 26 27 28 3 Even if the Court were to find sufficient allegations of a commercial injury, Plaintiff must also allege facts showing that its injuries to reputation or sales were proximately caused by Defendant’s false advertising. The Court notes that Plaintiff did not allege any specific facts pertaining to causation. (See generally Doc. 1). - 14 - 1 claim under 35 U.S.C. § 292. (Doc. 16 at 2). The false marking statute prohibits “mark[ing] 2 upon, or affix[ing] to . . . any unpatented article, the word ‘patent’ or any word or number 3 importing that the same is patented.” 35 U.S.C. § 292(a). The statute further “provides a 4 private right of action to enforce § 292(a) to any ‘person who has suffered a competitive 5 injury as a result of a violation of this section.’” Sukumar v. Nautilus, Inc., 785 F.3d 1396, 6 1399 (Fed. Cir. 2015) (quoting 35 U.S.C. § 292(b) (emphasis added)). Black’s Law 7 Dictionary “defines ‘competitive injury’ as ‘[a] wrongful economic loss caused by a 8 commercial rival, such as the loss of sales due to unfair competition[.]’” Id. at 1400 9 (quoting Black’s Law Dictionary (9th ed. 2009)). Under Ninth Circuit law, an injury is 10 competitive when it is “harmful to the plaintiff’s ability to compete with the defendant.” 11 Barrus v. Sylvania, 55 F.3d 468, 470 (9th Cir. 1995) (affirming a district court’s dismissal, 12 pursuant to Rule 12(b)(6), of consumers’ false advertising action against a light bulb 13 manufacturer because the consumers alleged neither commercial nor competitive injury). 14 Whether Plaintiff adequately pleads a Section 292 false patent marking claim turns 15 on whether it suffered a “competitive injury.” See Sukumar, 785 F.3d. at 1399. Plaintiff 16 argues in its Response (Doc. 19) that it suffered “both a diversion of sales and a lessening 17 of goodwill associated with its products.” (Doc. 19 at 7). Plaintiff, however, fails to allege 18 any specific facts to support this contention. See supra Part II(B)(1)(a); see also NeoGenis 19 Labs, Inc., 2019 WL 1438293, at *6 (dismissing Plaintiff’s false marking claim for lack of 20 “standing” under Rule 12(b)(6) on the same reasoning as its Lanham Act false advertising 21 claim; that Plaintiff could not establish it suffered a competitive injury); Two Moms & a 22 Toy, LLC v. Int’l Playthings, LLC, 898 F. Supp. 2d 1213, 1218 (D. Colo. 2012) (dismissing 23 a plaintiff’s Lanham Act and false patent marking claims under Rule 12(b)(6) because it 24 failed to plead specifics of an actual competitive injury; the plaintiff merely asserted that 25 “it could lose or that it could have already lost potential licensees,” which is insufficient to 26 give a plaintiff a right to recover under either statute).4 Accordingly, Plaintiff’s false 27 28 4 See supra n.2; see also NeoGenis Labs, Inc., 2019 WL 1438293, at *5 (addressing whether a plaintiff has “standing to bring a false marking” claim under Rule 12(b)(6), and apart from any discussion of Article III standing; also observing that whether plaintiff “suffered a competitive injury” is a required element of a false marking claim). - 15 - 1 marking claim cannot survive under Rule 12(b)(6). 2 c. Common Law Unfair Competition (Count II) 3 Next, Defendant argues that Plaintiff’s unfair competition claim, which is based on 4 the same false advertising theories as Plaintiff’s other claims, should likewise be dismissed. 5 (Doc. 16 at 14). “The Arizona Court of Appeals has held that the common law doctrine of 6 unfair competition ‘encompasses several tort theories, such as trademark infringement, 7 false advertising, palming off, and misappropriation.’” Joshua David Mellberg LLC v. Will, 8 96 F. Supp. 3d 953, 983 (D. Ariz. 2015) (quoting Fairway Constructors, Inc. v. Ahern, 970 9 P.2d 954, 956 (Ariz. Ct. App. 1998)). This claim “share[s] the same analysis” as Plaintiff’s 10 Lanham Act claim. See 3 Ratones Ciegos v. Mucha Lucha Libre Taco Shop 1 LLC, No. 11 CV-16-04538-PHX-DGC, 2017 WL 4284570, at *2 (D. Ariz. Sept. 27, 2017) (considering 12 plaintiff’s trademark infringement and unfair competition claims together); see also Walker 13 & Zanger, Inc. v. Paragon Industries, Inc., 549 F. Supp. 2d 1168, 1182 (N.D. Cal. 2007) 14 (“in the Ninth Circuit, claims of unfair competition and false advertising under state 15 statutory and common law are ‘substantially congruent’ to claims made under the Lanham 16 Act” (quoting Cleary v. News Corp., 30 F.3d 1255 (9th Cir. 1994))). Therefore, to state an 17 unfair competition claim based on Defendant’s alleged false advertising, Plaintiff must 18 adequately allege that it suffered a commercial injury as a result of the false advertising. 19 See NeoGenis Labs, Inc., 2019 WL 1438293, at *7 (dismissing Plaintiff’s unfair 20 competition claim, along with its Lanham Act claims, where the Court found no adequate 21 allegation of a commercial injury from false advertising). As reasoned above, Plaintiff fails 22 to adequately allege a competitive or commercial injury. See supra Part II(B)(1)(a). 23 Accordingly, Plaintiff’s common law unfair competition claim cannot survive under Rule 24 12(b)(6). 25 d. Civil Conspiracy (Count IV) 26 Plaintiff’s final claim of civil conspiracy incorporates the allegations that form the 27 bases for its other claims. (Doc. 19 at 16). “[C]onspiracy is not an independent tort.” BioD, 28 LLC v. Amnio Tech., LLC, No. CV-13-1670-HRH, 2015 WL 143811, at *3 (D. Ariz. Jan. - 16 - 1 12, 2015) (quoting Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 869 P.2d 454, 2 459 (Cal. 1994)). Therefore, the tort of conspiracy “cannot create a duty or abrogate an 3 immunity.” Applied Equipment Corp., 869 P.2d at 459; see also Micro/sys, Inc. v. DRS 4 Techs., Inc., No. CV-14–3441-DMG-CWX, 2015 WL 12748631, at *3 (C.D. Cal. Feb. 18, 5 2015) (dismissing a civil conspiracy claim where Lanham Act claims failed). Rather, it 6 “allows tort recovery only against a party who already owes the duty and is not immune 7 from liability based on applicable substantive tort law principles.” Id. Accordingly, 8 Plaintiff’s civil conspiracy claim is likewise dismissed pursuant to rule 12(b)(6).5 9 C. Leave to Amend 10 In its Response (Doc. 19), Plaintiff seeks leave to amend if the Court dismisses the 11 Complaint (Doc. 1). (See Doc. 19 at 16). A court should “freely give leave [to amend] when 12 justice so requires.” Fed. R. Civ. P. 15(a)(2). When a plaintiff requests leave to amend, a 13 court should consider the following factors: (1) undue delay, (2) bad faith, (3) prejudice to 14 the opposing party, (4) futility of amendment, and (5) whether plaintiff has previously 15 amended its complaint. Western Shoshone Nat. Council v. Molini, 951 F.2d 200, 204 (9th 16 Cir. 1991). 17 Here, the Court finds that Plaintiff does not have Article III standing, and 18 alternatively finds that Plaintiff does not allege sufficient facts to bring its specific claims 19 under the Lanham Act, false marking statute, and common law doctrine of unfair 20 competition. See supra Part II(A)–(B). Given Plaintiff’s repeated litigation in this forum, 21 it is not apparent that Plaintiff will be able to cure the defects identified in its Complaint 22 (Doc. 1) because Plaintiff should already be familiar with the requisite pleading standards. 23 See, e.g., NeoGenis Labs, Inc., 2019 WL 1438293, at *7. Nonetheless, as Plaintiff has not 24 yet amended the Complaint (Doc. 1) and because of the liberal policy in favor of 25 amendments embodied in Rule 15(a) and no showing of undue delay, the Court grants 26 Plaintiff leave to amend. (See Doc. 19 at 16); see also, e.g., Mark H. v. Lemahieu, 513 F.3d 27 28 5 Because these claims are being dismissed under Rule 12(b)(6), the Court need not consider Defendant’s other argument under Rule 9(b). - 17 - 1 922, 939–40 (9th Cir. 2008) (citing Verizon Del., Inc. v. Covad Comm’ns Co., 377 F.3d 2 1081, 1091 (9th Cir. 2004) (noting that Rule 15(a) embodies a “policy favoring liberal 3 amendment”)). Accordingly, should it choose to do so, Plaintiff must file a First Amended 4 Complaint within thirty (30) days of this Order. Attorney’s Fees 5 D. 6 Defendant requests this Court award attorney’s fees and costs in alleging that 7 Plaintiff’s claims are frivolous and harassing. (Doc. 16 at 18). The Lanham Act and false 8 patent marking statue permit an award of attorney’s fees in “exceptional cases.” 15 9 § 117(a); 35 U.S.C. § 285. “An exceptional case is simply one that stands out from others 10 with respect to the substantive strength of a party’s litigating position (considering both the 11 governing law and facts of the case) or the unreasonable manner in which the case was 12 litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014). 13 The Ninth Circuit interprets the exceptional-cases requirement “rather narrowly.” Classic 14 Media, Inc. v. Mewborn, 532 F.3d 978, 990 (9th Cir. 2008) (“Exceptional circumstances 15 can be found when the non-prevailing party’s case is groundless, unreasonable, vexatious, 16 or pursued in bad faith”). Even if a court determines that a case is “exceptional,” a court 17 still has discretion to deny attorney’s fees. See Ion Health & Fitness, Inc. v. Octane Fitness, 18 LLC, Nos. 2011–1521, 2011–1636, 2014 WL 4194609, at *3 (Fed. Cir. 2014) (“The 19 Supreme Court’s decision in Octane did not, however, revoke the discretion of a district 20 court to deny fee awards even in exceptional cases”). 21 Plaintiff recently filed several suits in the District of Arizona and Defendant alleges 22 that Plaintiff is a reputed “patent troll” against retailers of dietary supplements. (See Doc. 23 16 at 2). Although the “line distinguishing exceptional cases from non-exceptional cases is 24 far from clear” and is “especially fuzzy where the defendant prevails due to [a] plaintiff’s 25 failure of proof,” the Ninth Circuit stated that “an action is exceptional under the Lanham 26 Act if the plaintiff has no reasonable or legal basis to believe in success on the merits.” 27 Secalt S.A. v. Wuxi Shenxi Constr. Machinery Co., Ltd., 668 F.3d 677, 687 (9th Cir. 2012). 28 Although the Court finds herein that Plaintiff did not allege sufficient facts to establish - 18 - 1 Article III standing, the Court could conceive of a situation in which Plaintiff subjectively 2 believed—even if erroneously so—that its Lanham Act claim was not wholly frivolous. 3 “Insufficient facts to establish subject-matter jurisdiction does not automatically coextend 4 to indicate that there was absolutely no basis for Plaintiff[’s] belief that [it] could attain 5 success on the merits.” Dominick v. Collectors Universe, Inc., No. CV-12-04782-ODW, 6 2013 WL 990825, at *4 (C.D. Cal. Mar. 13, 2013) (declining to grant attorney’s fees to a 7 defendant after dismissing a case for the plaintiffs’ lack of standing to bring suit under the 8 Lanham Act). 9 Accordingly, the Court concludes that Plaintiff’s arguments do not rise to the high- 10 level of frivolity required to award fees against it. See Secalt S.A., 668 F.3d at 687. 11 Defendant’s request for attorney’s fees and costs is denied. 12 III. CONCLUSION 13 Based on the foregoing, 14 IT IS ORDERED that Defendant American Fitness Wholesaler’s Motion to 15 Dismiss (Doc. 16) is GRANTED pursuant to Rule 12(b)(1) for lack of standing.6 16 IT IS FURTHER ORDERED granting Plaintiff leave to amend its complaint. 17 Plaintiff must file a First Amended Complaint within thirty (30) days of the date of this 18 Order. If Plaintiff does not file its First Amended Complaint within thirty (30) days, then 19 the Clerk of Court will dismiss this case without further notice and enter judgment 20 accordingly. In accordance with District of Arizona Local Rule Civil 15.1, an amended 21 complaint must “indicate in what respect it differs from the pleading which it amends, by 22 bracketing or striking through the text to be deleted and underlining the text to be added.” 23 LRCiv 15.1. 24 /// 25 /// 26 /// 27 /// 28 6 As well as alternatively under Rule 12(b)(6). - 19 - 1 2 3 IT IS FURTHER ORDERED that Defendant American Fitness Wholesaler’s request for attorney’s fees (contained in its Motion to Dismiss (Doc. 16)) is DENIED. Dated this 15th day of August, 2019. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 20 -

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