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Eli Lilly and Co. v. Gitmed

United States District Court, E.D. California

May 3, 2017

JOHN DEREK GITMED, et al., Defendants.


         This action is before the court on defendant John Gitmed's September 26, 2016 motion to dismiss. (Doc. No. 35.) For the following reasons, the court will deny defendant's motion.


         This action proceeds on plaintiff Eli Lilly and Company's February 8, 2016 complaint against defendants John Derek Gitmed, Holly Gitmed, Felicia Gitmed, and Anthony Pollino, Jr.[1](Doc. No. 1.) In the complaint, plaintiff brings the following six claims: (i) trademark counterfeiting in violation of § 32(1) of the Lanham Act 15 U.S.C. § 1114(1); (ii) trademark infringement in violation of § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1); (iii) false destination of origin in violation of § 43(a) of the Lanham Act, 1125(a); (iv) unfair competition in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), (v) passing off and unfair competition in violation of California common law; and (vi) unfair competition in violation of the California Business & Professions Code §§ 17200, et seq. (Id. at 11-15.) Plaintiff seeks damages, restitution, prejudgment and post-judgment interest, injunctive relief, and attorneys' costs and fees. (Id. at 15-17.)

         Plaintiffs complaint alleges the following facts. Plaintiff Eli Lilly and Company (“Lilly”) is a corporation headquartered in Indiana that manufactures, distributes, and markets pharmaceutical products, including a drug known as Cialis® (“Cialis”) that has the generic name tadalafil. (Id. at 4, ¶ 13.) Cialis has been FDA-approved for the treatment of erectile dysfunction and benign prostatic hyperplasia, or enlarged prostate, and is only available by prescription. (Id. at 4-5, ¶¶ 14-15, 21.)

         Lilly has exclusive rights to manufacture Cialis for distribution in the United States. (Id. at 4, ¶ 14.) In the United States, Lilly distributes Cialis only to authorized wholesalers, who then distribute Cialis to pharmacies, who in turn distribute the drug to patients. (Id. at 5, ¶ 18.) Lilly has acquired a number of federal trademarks registered with the United States Patent and Trademark Office (“PTO”) that are used in connection with sales and promotion of Cialis, including the following: (i) Reg. No. 2, 724, 589 for the word mark “Cialis”; (ii) Reg. No. 2, 833, 222 for the Cialis tablet appearance; (iii) Reg. No. 2, 833, 221 for the Cialis swirl design mark; (iv) Reg. No. 1, 318, 867 for the “Lilly” word in stylized letters mark; (v) Reg. No. 1, 226, 434 for the word mark “Lilly”. (Id. at 4, ¶ 16.)

         Defendants are California residents who worked with foreign and domestic entities to produce and distribute counterfeit versions of the drug Cialis throughout the United States. (Id. at 3, 6-7, ¶¶ 6-9, 28.) To produce the counterfeit drugs, defendant John Gitmed provided pictures of Cialis tablets and packaging to suppliers who replicated Lilly's Cialis trademarks. (Id. at 7, ¶ 31.) Suppliers then shipped the goods into and within the United States to various addresses controlled by defendants, including the “California Confidence Company” (“CCC”). (Id. at 7, ¶ 32.) After receiving the shipments, defendants sold the counterfeit Cialis in person and by U.S. mail to customers who responded to their online advertisements. (Id. at 6, 8, ¶¶ 28, 34.) Plaintiff Lilly has not consented to, sponsored, endorsed, or approved defendant's improper use of its Cialis trademarks. (Id. at 10, ¶ 41.)

         On August 28, 2014, 2014, defendants were indicted by a grand jury in the Eastern District of California for conspiracy to traffic in counterfeit goods and commit mail fraud in violation of 18 U.S.C. § 371, and trafficking in counterfeit goods in violation of 18 U.S.C.§ 2320(a)(1). (Id. at 9, ¶ 37) (see Case No. No. 1:14-cr-00189-AWI-BAM (E.D. Cal.)). Defendant John Gitmed ultimately pled guilty to trafficking in counterfeit Cialis in violation of 18 U.S.C. § 2320(a). (Id.) As part of the plea agreement in his case, defendant John Gitmed admitted that he had knowingly used counterfeits of plaintiff s Cialis trademarks. (Id.)

         Defendants' unlawful activity has resulted in harm to plaintiff by diminishing the value of Lilly's trademarks, interfering with its ability to exercise control over the quality and safety of its product, depriving it of its right to determine the manner in which its image is presented to the general public, and injuring its goodwill and business reputation. (Id. at 10, ¶ 45.) Unless defendants are enjoined from engaging in the infringing conduct described, plaintiff will suffer irreparable injury and further damage. (Id. at 10, ¶ 46.)

         On September 26, 2016, defendant John Gitmed filed the instant motion to dismiss plaintiffs complaint. (Doc. No. 35.) Plaintiff filed its opposition on October 28, 2016. (Doc. No. 37.) Defendant has not filed a reply.[2]


         The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency of the complaint. N. Star Int'l v. Ariz. Corp. Comm 'n, 720 F.2d 578, 581 (9th Cir. 1983). “Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep t , 901 F.2d 696, 699 (9th Cir. 1990). A claim for relief must contain “a short and plain statement of the claim showing that the pleader is entitled to relief” Fed.R.Civ.P. 8(a)(2). Though Rule 8(a) does not require detailed factual allegations, a plaintiff is required to allege “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); Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

         In determining whether a complaint states a claim on which relief may be granted, the court accepts as true the allegations in the complaint and construes the allegations in the light most favorable to the plaintiff Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Novak v. United States, 795 F.3d 1012, 1017 (9th Cir. 2015). It is inappropriate to assume that the plaintiff “can prove facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged.” Associated Gen. Contractors of Cal, Inc. v. Cal State Council of Carpenters, 459 U.S. 519, 526 (1983).


         Defendant John Gitmed moves to dismiss the complaint on the basis that plaintiff cannot allege damages as a matter of law, since the court in his criminal case declined to impose a restitution order against him. (Doc. No. 35 at 1.) In support of his motion, defendant attaches the following: (i) a letter from his counsel reporting on the status of the criminal case, (Id. at 10-11); (ii) a portion of the docket from defendant's criminal case, United States v. Gitmed, No. 1:14-cr-189-AWI, (Id. at 10-12); and (iii) a memorandum opinion from a criminal case in the Eastern District of ...

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