Insect Science Resource, LLC v. Timberline Fisheries Corporation, No. 1:2007cv02662 - Document 78 (N.D. Ga. 2010)

Court Description: ORDER and OPINION granting 68 defendant's Motion to Dismiss; denying as moot 69 Motion to Stay; denying as moot 72 Motion to Amend; denying as moot 72 Motion to Add Party. The case is DISMISSED WITHOUT PREJUDICE, and the Clerk is directed to close case. Signed by Judge Julie E. Carnes on 02/03/10. (fap)
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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION INSECT SCIENCE RESOURCE, LLC, Plaintiff, CIVIL ACTION NO. v. 1:07-CV-2662-JEC TIMBERLINE FISHERIES CORP., Defendant. ORDER and OPINION This case is presently before the Court on defendant's Motion to Dismiss [68J, defendant's Motion to Stay Discovery [69], and plaintiff's Second Motion to Amend Complaint and First Motlon to Add Party Plaintiff [72]. The Court has reviewed the record and the arguments of the parties and, for the reasons stated below, concludes that defendant's Motion defendant's Motion to to Dismiss [68] Stay Discovery [69J should be and GRANTED, and plaintiff's Second Motion to Amend Complaint and First Motion to Add Party Plaintiff [72] should be DENIED as moot. BACKGROUND This case involves a trademark dispute between plaintiff Insect Science Resource, Timberline A072A (Rev.8182) LLC Fisheries ("plaint iff" Corporation or "ISR, LLC") ("defendant"). and defendant Plaintiff is a limited liability corporation organized by Dr. Craig Sheppard and his wife, Sheila Resp.") Sheppard. at [70J Sheppard, doing (Pl.'s 13-14.) business Before as Hermetia illucens larva. "black soldier fly," a (Id. is Resp. a to Mot. to plaintiff's Dismiss incorporation, sole proprietorship, at 13.) "live pet ("Pl.'s developed the The larva, also known as a food (a feeder insect) captive reptiles, amphibians, birds, fish, and small mammals." Complo [60] at 'll 7.) "PHOENIX WORM," and, Dr. ("USPTO"). trademark on August 29, (Plo's Resp. registration 2005, (Am. filed an application to for [70] Patent and Trademark at 13.) PHOENIX WORM to The USPTO issued a "David Craig Sheppard (Georgia Sole Proprietorship)" on August 8, 2006. to Am. Complo for Sheppard referred to his invention as a register the PHOENIX WORM mark with the U.S. Office Dr. (Ex. B, attached [60J.) In September 2005, Science Resource Dr. ("ISR"), and Mrs. Sheppard, operating as Insect began marketing the PHOENIX WORM. (Id. ) On September 20, 2005, ISR contacted defendant in an attempt to have defendant distribute the product.] (Am. Complo [60] at 'll 12.) On Despite plaintiff's allegation that plaintiff initiated this contact, plaintiff was not yet incorporated on this date, thus it was ISR, and not ISR, LLC, that contacted defendants. Though plaintiff consistently makes this mistake in its Amended Complaint [60J, the distinction between the entities is an important one. Therefore, throughout this opinion, the Court will use "ISR" to indicate when an action was taken by ISR, and not by plaintiff, ISR, LLC. 2 A072A (Rev.8182) November 14, 2005, at defendant's request, ISR sent defendant samples of its black soldier fly larva and marketing materials. 13.) (Id. at 'I[ After receiving these materials, on December 1, 2005, defendant contacted ISR, proposing that ISR provide defendant with "generic" black soldier fly larva that defendant could then sell under its own brand name. ISR declined. As of January 2006, at (Id. 'I[ 14.) ISR was offering PHOENIX WORMs for sale on at 15.) its website, www.phoenixworm.com. Dr. Sheppard incorporated Insect Science Resource, and Mrs. Georgia. time, and (Pl.'s Resp. (Id. [70J at 14.) 'I[ On May 12, 2006, LLC in Plaintiff contends that at this "Dr. Sheppard ceased doing business as a sale proprietorship all interests proprietorship (Id. ) On were June and liabilities assumed by and 23, 2006, of David Craig incorporated defendant Sheppard into" registered sale plaintiff. the website www.pheonixworm.com (a slight misspelling of plaintiff's exact mark), which plaintiff alleges [pJlaintiff's good will." was (Am. done "in CampI. an attempt [60 J at 'I[ to trade 16.) on Plaintiff further alleges that, at different times, defendant had this website "point" to www.calciworms.com. where defendant sold the CALCIWORM: its own version of Hermetia lilucens. (Id. at '1['1[ 18-21.) On October 25, 2007, plaintiff filed the suit against defendant, alleging federal trademark infringement in violation of 15 U.S.C. 1114; federal unfair competition in violation of 15 U.S.C. 3 AO 72A (Rev.8182) § § l125(a); violation of the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d); and common law infringement and unfair competition. (See Comp1. [1] at 'JI'JI 30-51.) On May 19, 2008, plaintiff moved to file its first amended complaint, including a new claim for federal false advertising in violation of 15 U.S.C. submitted to a magistrate judge. (Mot. the magistrate judge's recommendation Court granted plaintiff's motion § to Am. 1125(a), Comp1. [21].) (Report and Rec. (Feb. 10, which was 2009 Order Upon [51J), the [58J), and plaintiff filed its Amended Complaint [60] on February 25, 2009. On April 13, 2009, defendant filed a Motion to Dismiss [68] this case, alleging that plaintiff did not have standing to pursue the action. Motion (Mot. to Stay to Dismiss Discovery [68].) [69] defendant's motion to dismiss. Defendant pending the concurrently filed a Court's (Mot. to Stay Disc. ruling [69].) on Seeking to remedy the alleged standing defects in its complaint, plaintiff filed its Second Motion to Amend Complaint and First Motion to Add Party Plaintiff ("Motion to Amend") [72J on May 5, 2009. (Mot. to Amend [72].) Each of these motions is presently before the Court. DISCUSSION I. Motion to Dismiss [68] Article III of the United States Constitution, Federal Rules of Civil Procedure, Rule 12 (h) (3), Eleventh 4 A072A (Rev.8I82) Circuit precedent, and jUdicial economy all require dismissal of this case. A. Standard for Dismissal for Lack of Subject Matter Jurisdiction and Standard for Article III Standing "Federal courts are courts of limited jurisdiction." Mut. Ins. 2003) Cir. Co. (quoting Burns v. 1994)) federal 1003 Windsor Ins. thus Parker v. (11th Cir. 2004). "bears Scrap Metal the 807 (11th Cir. 31 f.3d 1092, 1095 Co., (internal quotation marks omitted). jurisdiction existence." LLC, 329 F.3d 80S, v. McKinnon Motors, Federated burden A party invoklng of Processors, (1lth establishing its 386 f.3d 993, Inc., That party must allege facts sufficient to show jurisdiction and, when the Court's jurisdiction is appropriately challenged, support those facts by competent evidence. Gen. Motors Acceptance Corp., 298 O.S. McNutt v. 178, 189 (1936). As suggested by McNutt, the Court may consider evidence outside the pleadings to determine whether it has jurisdiction. v. Sipos, 259 f.3d 1327, 1332 (11th Cir. See Goodman 20011 (citing Smith v. Corp., 236 f. 3d 1292, 1299 (11th Cir. 2001)). GTE To that end, the Court has the power to grant a motion to dismlss for lack of subject matter jurisdiction on alone; any of three separate bases: "(1) the complaint (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the ConsoI. [C] ourt' s resolution of disputed Gov't of Augusta-Richmond County, 5 AQ 7'2A (R.v.Bl82) facts." McElmurray v. 501 f.3d 1244, 1251 (11th Cir. 2007) 1981)) (citing Williamson v: Tucker, 645 F.2d 404, 413 (5th Cir. (internal disputed facts, quotation marks omitted). In a case involving it may be necessary to provide an opportunity for discovery and a hearing Uthat is appropriate to the nature of the Id. motion to dismiss." In this case, the Court is able to decide the standing question on the complaint supplemented by undisputed facts, without resolving any factual disputes. For purposes of this motion, the Court assumes all the allegations in the complaint are true and construes all facts in favor of plaintiff. Cir. 2005) Scott v. 405 F.3d 1251, 1253 Taylor, (11th (citation omitted). Accordingly, discovery and a hearing are not necessary. Standing may be raised at any time by either the parties or the Court. Bats v. 2007) (citing Fla. 1227, 1230 Ass'n of Med. (11th Cir. Article III of subject matter the 1999)). United U. S. prohibits courts federal plaintiff's claim. F.3d 1257, CONST. Supp. Equip. 2d 1311, Dealers (11th (N.D. v. Apfel, of Constitution, federal art. from III, issuing Cir. 2006). which Ga. 194 F.3d § to 2. This advisory Inc. limits the Ucases" courts CAMP Legal Defense Fund, 1269 1314 The standing requirement stems from States jurisdiction "controversies." 451 495 F. Cobb County, and requirement opinions on a v. City of Atlanta, Whether a plaintiff has standing to assert a particular claim is thus a Uthreshold question in every federal case." Id. (internal quotation marks omitted). 6 A072A (Rev.8182) See also KH Outdoor, LLC v. Cir. 2006) ("It is 458 F.3d 1261, 1266 (11th City of Trussville, by now axiomatic that a plaintiff must have standing to invoke the jurisdiction of the federal courts."). "[T]he irreducible constitutional minimum of standing contains three elements." 451 F.3d at 1269 (quoting LUjan v. Defenders U.S. 504 of Wildlife, omitted) . CAMP, 555, 560 Those elements are: (1992)) "(1) (internal quotation marks an injury in fact, meaning an injury that is concrete and particularized, and actual or imminent, (2) a causal connection between the injury and the causal conduct, and (3) a likelihood that the injury will be redressed by a favorable decision." of Id. (quoting Granite State Outdoor Adver., Inc. v. City 351 Clearwater, F.3d quotation marks omitted) the plaintiff's case." 1112, 1116 (11th Cir. 2003)) (internal Each element is "an indispensable part of Id. (internal quotation marks omitted).' Moreover, "standing cannot be inferred argumentatively from averments In the pleadings, record." U.S. 215, Id. but at 1276 231 rather must affirmatively (quoting FW/PBS, Inc. (1990) ) (internal v. quotation In the City of Dallas, 493 marks appear and emphasis omitted). The party claiming standing has the burden to plead these elements. E.F. Hutton & Co., Inc. v. Hadley, 901 F.2d 979, 984 (11th The federal jUdiciary also recognizes a set of prudential standing principles. CAMP, 451 F.3d at 1270. However, prudential standing is reached only when plaintiff first establishes that constitutional ~tanding exists, which plaintiff here does not, see infra. Though plaintiff addresses prudential standing (see, e.g., PI.' s Resp. [70J at 9), it is a non-issue in the case. 7 AO 7'2A (Rev.Bl82) Cir. 1990) (internal quotation marks omitted) If a plaintiff lacks standing to bring an action, sUbject matter jurisdiction is absent and the court must dismiss the case. v. Town of Ponce ("Simply put, Inlet, once a 405 F.3d federal 964, 974-75 (11th court determines that sUbject matter jurisdiction, the court it Cir. Bochese 2005) is without is powerless to continue") (citation omitted); FED. R. Crv. P. 12 (h) (3) ("If the court determines at any time that it lacks sUbject-matter jurisdiction, the court must dismiss the action. Packaging H ) Kentucky Fried Chicken 549 F.2d 368, Corp., 391-92 Corp. (5th Cir. v. Diversified 1977) I"A federal court must dismiss a case over which it has no Jurisdiction whenever the jurisdictional defect appears.") B. The Plaintiff Does Not Have Standing Court must dismiss the case for lack of subject matter jurisdiction because plaintiff does not have standing. FED. R. Crv. P. 12 (h) (3). 1. Plaintiff Lacks Article III Standing The injury in fact element of Article III standing requires that plaintiff interest./f have suffered Lujan, "an invasion 504 U.S. at 560. interest in a trademark, of a legally protected To have a legally protectable a party must own the mark at the time of Decisions of the former Fifth Circuit filed prior to October 1, 1981 constitute binding precedent in the Eleventh Circuit. Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1207 (11th Cir. 1981) (en bane) . 8 A072A (Rev.8182) filing. JSW, See Visa U.S.A. 2006 WL 516662, "could not have at Inc. v. *7-8 suffered a No. C 02-01786 2005) (plaintiff First Data Corp., (N. D. Cal. cognizable Aug. 16, injury under Article III because it did not maintain an enforceable right in the trademark it sought to protect"); Gaia Techs., Inc. v. Reconversion Techs., Inc., 93 F.3d 774, 777-79 Gaia Techs., Inc. Cir. 1996) (Fed. Cir. 1996), amended on other grounds by v. Reconversion Techs., Inc., 104 F.3d 1296 (Fed. (reversing district court's denial of a motion to dismiss for lack of standing because assignment of trademark rights executed after the suit commenced but whose effective date was filing was "not sufficient to confer standing . before the . retroactively").' Far from meeting its burden to prove the existence of federal standing, plaintiff admitted that Dr. Sheppard, not plaintiff, owned the trademark at the time of filing and at the time of defendant's The court further noted that: As a general matter, parties should possess rights before seeking to have them vindicated in court. Allowing a subsequent assignment to automatically cure a standing defect would unjustifiably expand the number of people who are statutorily authorized to sue. Parties could justify the premature initiation of an action by averring to the court that their standing through assignment is imminent. Permitting non-owners and licensees the right to sue, so long as they eventually obtain the rights they seek to have redressed, would enmesh the judiciary in abstract disputes, risk multiple litigation, and provide incentives for parties to obtain assignments in order to expand their arsenal and the scope of litigation. Inevitably, delay and expense would be the order of the day. Gaia Techs., Inc., 93 F.3d 774 at 780 9 A072A (Rev.Bi82) (citation omitted). alleged infringement. CampI. (Mot. to Amend [72] at 12-13); see also Am. [60] at Exs. B, C (publicly filed documents showing that Dr. Sheppard owns trademark) 1292 ~~ (llth Cir. 2009) 5) See Crenshaw v. Lister, ("'Where there is a conflict allegations in a pleading and exhibits thereto, that the exhibits control.'''). 556 F.3d 1283, between it is well settled In the face of plaintiff's admission and the accompanying exhibits, plaintiff's previous claims to be the owner of the mark fail. Therefore, plaintiff indisputably dld not have standing to bring this action at the time of filing, see Gaia, 93 F.3d at 777-79. Dr. Sheppard Cannot Remedy Assigning Mark to Plaintiff a. This Defect by Plaintiff argues that Dr. Sheppard has, subsequent to the filing of this action, assigned to plaintiff the domestic ownership in the mark, rights and that this assignment gives plaintiff standing to bring this suit. However, Dr. Sheppard's attempt to assign the mark cannot cure the standing defect. Despite attempting to assign the mark to plaintiff on April 8, 2009,' a year and a half after the Complaint [lJ was filed, Dr. On a motion to dismiss, the Court may take judicial notice of public records without converting the motion to one for summary judgment. Bryant v. Avado Brands Inc., 187 F.3d 1271, 1279-80 (11th Cir. 1999) (taking jUdicial notice of public records on file with the U.S. Securities and Exchange Commission). Though plaintiff states that it attempted to assign the mark on April 8, 2009, it did not file a copy of that document anywhere in the pleadings. (Mot. to Amend [72J at ~ 10.) 10 A072A (Rev.Sl8Z) Sheppard concurrently argues that he did not need to assign the mark because upon (1) he and the plaintiff are the "same party" and (2) incorporation of ISR, ISR, LLC assumed "all interests liabilities of David Craig Sheppard sole proprietorship." to Amend [72J at 'JI 10; PI.' s Resp. that (See and Mot. [70] at 5, 14.) First, the very fact that Dr. Sheppard attempted to assign the mark in April 2009 shows that he and ISR, LLC are separate entities. Second, this argument defies black-letter contract law that an individual and a corporate entity are legally separate and distinct. See, e.g., "limited separate Lattanzio liability from v. COMTA, company its 481 F.3d 137, 140 (2nd Cir. 2007) is a distinct legal Incorporating owner") . entity also that (a lS would not have been In automatically assign Dr. Sheppard's rights to ISR, LLC. Furthermore, any assignment would writing before the case was filed, § 1060 (a) (3) - (4) duly executed. purchaser for have had to which it was not. See 15 U.S.C. (" raj ssignments shall be by instruments in writing An assignment shall be void against any subsequent valuable consideration without notice, unless the prescribed information reporting the assignment is recorded in the Patent and Trademark Office within three months after the date of the assignment or prior to the subsequent purchase.") b. Nutritech is Not Apposite To support its argument that it should be able to assign the mark retroactively, plaintiff relies heavily on an unpublished case 11 A072A (Rev.8I82) from the District of Arizona. Matrix Nutrition, LLC, Ariz. May 11, 2007). No. See Nutri tech CV 06-461-PHX-MHM, Solutions, Ltd. 2007 WL 1424337 v. (D. This is the only case plaintiff cites where a court made an exception to Gaia's rule that an assignment cannot be made after the case has been filed. In Nutritech, the plaintiff owned the mark at issue at the time of infringement, but assigned the mark to a third party prior to commencing suit. Id. at *1. After plaintiff filed the action, the third party assigned the mark and the attendant rights to sue for prior infringement back to plaintiff. this assignment as a basis for The defendant objected to Id. standing, relying on Gaia for the proposition that "a subsequent assignment of rights confer retroactive standing to sue." Id. at *5. . does not However, the Nutritech court held that the assignment could confer standing; the court held assignment Gaia [was] distinguishable, back to the because party who was in [Nutritech] "the allegedly injured by Defendants' actions and who owned the right to sue at the time of the alleged injury," whereas in Gaia the assignment was to a random third party. Id. Plaintiff argues that like in Nutritech, this assignment was not to a random third party as in Gaia, harmed by defendant's actions. this argument is unpersuasive. (Pl.'s Resp. [70J at 4-5.) However, Unlike the Nutritech plaintiff, which 12 A072A (Rev.8182) but to an entity that had been owned the mark at the time of the alleged infringement and suffered injury, ISR, LLC did not own the PHOENIX WORM mark at the time of infringement or any other time. Nutritech, 2007 WL 1424337 at *3. Because plaintiff had never owned the mark, plaintiff could not have suffered a legally cognizable injury when the infringement occurred. Therefore, plaintiff cannot meet the injury in fact requirement of Article III standing and does not have subject matter jurisdiction over the case. 2. Judicial Economy Favors Dismissal Presumably because it recognizes that the Court does not have j ur isdiction over t he case, plainti ff argues ext ens i vel y that the Court should not dismiss the case for reasons of judicial economy because an "identical U Resp. case would be re-filed. (See, e.g., Pl.'s [70] at 2, 12, 14.) However, in addition to the fact that the Court is required to dismiss the case, dismissal will actually further judicial economy. The Court's resources are best preserved by hearing a case over which it undisputably has subject matter jurisdiction. It would be far more wasteful to litigate this case and then be reversed on appeal because plaintiff did not have standing. If the case is re-filed, presumably the plaintiff will have standing, so the case will not be Defendant also argues that the case would be re-filed in Illinois for substantive reasons that the Court will not address in this Order. (See, e.g., Reply to Mot. to Dismiss [75J at 3-4.) 13 A072A (Rev.eJ82) identical, as plaintiff argues. Accordingly, defendant's Motion to Dismiss should be GRANTED. The Court cannot do contortions to keep the case alive when plaintiff should have been more careful suffers harm dismissal; no with in filing. the Additionally, case is dismissed prejudice, so Dr. Sheppard can re-file the case. ex reI. U.S. 1232 (11th v. Orlando Reg'l Healthcare Sys., Cir. 2008) ("A dismissal for plaintiff without See, e.g., StaIley Inc., lack of 524 F.3d 1229, subject matter jurisdiction is not a judgment on the merits and is entered without prejudice.") II. (citation omitted). Motion to Stay Discovery [69] and Second Motion Complaint and Motion to Add Party Plaintiff [72] to Amend Because the Court dismisses the case, defendant's Motion to Stay Discovery [69] and Second Motion to Amend Complaint and Motion to Add Party Plaintiff [72] are DENIED Atlantic Se. Airlines, Inc., (Carnes, lack of J.) as 851 F. moot. Supp. e. g., See, 465, 469 Black v. (N.D. Ga. 1994) (denying other motions as moot after dismissing case for subject matter Stanley-Bostitch, Inc. , jurisdiction); see 240 100-01 F.3d 95, also Christopher (lst Cir. v. 2001) ("[O]rders relating to the merits of the underlying action are void if issued without subject matter jurisdiction."). However, the Court will briefly address why the Court cannot add another party. Plaintiff argues standing dispute, that if joinder of the Dr. 14 AO 72A (Rev.8182) assignment cannot Sheppard under resolve Federal Rules the of Civil Procedure 15 (a) and 19 (a) (1) cure the standing defect. would be appropriate and would (See generally Mot. also FED. R. Crv. P. 15 (a), 19 (a) (1). to Amend [72].) See While plaintiff is correct that federal Rule of Civil Procedure 19 requires that a trademark owner in possession of substantial interests in the mark is allowed to join an infringement suit involving that mark, the Rule assumes the suit 1S properly before the court. 47 F.3d 1128,1129-30 Diamedix Corp., plaintiff FED. R. Crv. P. 19 (a) (1) relies, does not require (Fed. Cir. otherwise, Abbott Labs. v. 1995), for upon which constitutional standing was not at issue in that case; plaintiff had rights in the patents at issue at the time of the alleged infringement and at the time suit was filed. In this case, plaintiff had no constitutional standing to bring this action. Court has Because plaintiff had no constitutional standing, the never had jurisdict10n over this matter, authority to take further action in this case. Lujan, and has no 504 U.S. at 571 n. 4 ("It cannot be that, by later participating in the suit, [an additional party] created a redressability (and hence a jurisdiction) that did not exist at the outset. "); Nat' 1 Licensing Ass 'n, LLC v. Inland Joseph Fruit Co., 361 F. Supp. 2d 1244, 1257 ( "Because [plaintiff] has no legally IE.D. Wash. 2004) recognized entitles it to bring or join an infringement action, problem cannot be cured by the joinder of the interest that its standing trademark registrants."); Alabama v. U.S. Army Corps of Engineers, 382 F. Supp. 15 AQ72A (Rev.8182) 2d 1301, 1315-16 jurisdiction over (N.D. the Ala. claims 2005) in the ("[WJhen original the court complaint, has it no must dismiss the case, and it has no jurisdiction to permit an amendment) ; Stafford v. Mobil Oil Corp., 945 F.2d 803, 806 (5th Cir. 1991) (when jurisdictional defect is actual and substantive rather than formal, amendment is not allowed) (citation omitted) CONCLUSION For the foregoing Motion to Dismiss Discovery [69] (68J should reasons, the Court finds that defendant's should be GRANTED, defendant's Motion to Stay be DENIED as moot, and plaintiff's Second Motion to Amend Complaint and First t~otion to Add Party Plaintiff should be DENIED as moot. The case is DISMISSED without prejudice, and the Clerk is directed to close the case. SO ORDERED, this day of February, 16 AO 72A (Rev.8182) 2010.