The opinion of the court was delivered by: Honorable Larry Alan Burns United States District Judge
ORDER GRANTING ZEST'S MOTION TO DISMISS WITHOUT PREJUDICE
On March 12, 2010, Zest sued Implant Direct for patent infringement. That case is ongoing. Most recently, the Court held a Markman hearing and issued a subsequent order construing the patent claims at issue. On September 27, 2011, Implant Direct took the offensive, separately suing Zest on an assortment of claims: unfair competition, false advertising, trademark infringement, and trade libel. The crux of Implant Direct's lawsuit is that Zest's advertisements for its own product: (1) misrepresent the nature of its patent infringement lawsuit against Implant Direct; (2) misrepresent the capabilities of Implant Direct's product; and (3) contain unauthorized depictions of Implant Direct's product. Now pending is Zest's motion to dismiss Implant Direct's complaint.
A 12(b)(6) motion to dismiss for failure to state a claim challenges the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). To defeat such a motion, a complaint's factual allegations needn't be detailed; they must simply be sufficient to "raise a right to relief above the speculative level . . . ." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, "some threshold of plausibility must be crossed at the outset" before a case can go forward. Id. at 558 (internal quotations omitted). A complaint has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id.
While the Court must draw all reasonable inferences in Implant Direct's favor, it need not "necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (internal quotations omitted). In fact, the Court does not need to accept any legal conclusions as true. Iqbal, 556 U.S. at 678. A complaint does not suffice "if it tenders naked assertions devoid of further factual enhancement." Id. (internal quotations omitted). Nor does it suffice if it contains a merely formulaic recitation of the elements of a cause of action. Twombly, 550 U.S. at 555.
II. Lanham Act False Advertising Claim
ID's first claim against Zest alleges unfair competition and false or misleading descriptions of fact under the Lanham Act, 15 U.S.C. § 1125(a)(1)(B).*fn1 This is, basically, a false advertising claim. ID must show that: (1) Zest made a false or misleading statement of fact in commercial advertising about ID's product; (2) the statement actually deceived or is likely to deceive a substantial segment of the intended audience; (3) the deception is material in that it is likely to influence purchasing decisions; (4) Zest caused the statement to enter interstate commerce; and (5) the statement resulted in actual or probable injury to ID. Zenith Electronics Corp. v. Exzec, Inc., 182 F.3d 1340, 1348 (Fed. Cir. 1999).
Starting with the first element, what is Zest's false or misleading statement? According to ID, "Defendants have sued and made false representations of patent infringement against Implant Direct for its GPS product while advertising that the GPS product does not contain the patented features of the Locator product in commercial periodicals." (Compl. ¶ 30.) ID doesn't identify any specific statements*fn2 , but it must have in mind the following language from a Zest LOCATOR advertisement that it attaches to its complaint:
GPS ABUTMENTS & COMPONENTS
Beware of other "look-alike" products-they do NOT have the unique innovations provided by the Zest patented product. The "look-alike" products do not have the Zest pivoting technology and in fact, are designed not to pivot, which is a key performance feature of the LOCATOR System. (Compl. Ex. 1.) ID's position, apparently, is that it's misleading of Zest to accuse ID of patent infringement and then claim its product is distinguishable from ID's product. If that's the case, ID insinuates-if ID's product lacks "the unique innovations provided by the Zest patented product"-then Zest shouldn't be suing ID for patent infringement in the first place.
There are at least two problems with this. First, the advertisement at issue says nothing about Zest's patent infringement lawsuit against ID (or the patents themselves, for that matter), and ID doesn't claim that there's something independently false or misleading about Zest's statement that ID's GPS product lacks the innovations of Zest's LOCATOR product. Second, as the Court's recent Markman order in the patent infringement case made clear, patent infringement turns on the claims of a patent, not on the structure or functioning of a product that embodies the claims. See SRI Int'l v. Matsushita Elec. Corp. of Am., 775 F.2d 1107, 1121 (Fed. Cir. 1985) (en banc) ("Infringement . . . is determined by comparing an accused product not with a preferred embodiment described in the specification, or with a commercialized embodiment of the patentee, but with the properly and previously construed claims in suit."). Thus, it's not inherently inconsistent of Zest to claim that ID has infringed its patents and that ID's GPS product doesn't contain all of the innovations of Zest's LOCATOR product.
There is another statement by Zest upon which ID may also be basing its false advertising claim:
Dear valued customers of the ZEST LOCATOR Attachment System who currently purchase from Attachments International and Sybron Dental ...