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Advanced Oral Technologies, L.L.C v. Nutres Research

January 20, 2011

ADVANCED ORAL TECHNOLOGIES, L.L.C, PLAINTIFF,
v.
NUTRES RESEARCH, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Debevoise, Senior District Judge

NOT FOR PUBLICATION

OPINION

Plaintiff, Advanced Oral Technologies, L.L.C. (alternatively "AOT"), instituted this suit against Defendant, Nutrex Research, Inc. ("Nutrex"), and others, seeking to enjoin the sale of a bodybuilding supplement which incorrectly lists one of Plaintiff's patented substances among the ingredients contained on the supplement's product label. Presently before the court is Defendants' Motion to Dismiss Plaintiff's Complaint in its entirety.

For the reasons set forth below, Defendants' Motion is GRANTED with respect to Count Two (RICO), Count Three (Tortious Interference), Count Five (Common Law Misappropriation), and Count Six (Accounting) of Plaintiff's Complaint. Defendants' Motion is DENIED with respect to the remaining counts.

I.BACKGROUND

Initially Plaintiff sought a preliminary injunction. After a hearing the Court denied the application for injunctive relief. It did not address the issue of Plaintiff's likelihood of success on the merits, finding that the steps that Defendants had taken to cure the alleged violation rendered preliminary relief unnecessary. The factual account set forth below is based upon evidence presented by the parties in connection with the preliminary injunction hearing.

Plaintiff is the exclusive licensee and sole manufacturer of a patented molecule known as 2nitrooxy ethyl2amino 3methylbutanoate (the "Molecule"), which is used in a bodybuilding supplement called eNoxide. Nutrex is the manufacturer of a different bodybuilding supplement known as "Hemo Rage Black" (sometimes referred to herein as the "Product"), which is essentially a cocktail of bodybuilding supplements. Nutrex sells Hemo Rage Black through numerous retailers, including Defendants Bodybuilding.com, Inc., Vitamin Shoppe, Inc., Europa Sports Products, Inc. ("Europa"), and General Nutrition Centers, Inc. ("GNC").

When Hemo Rage Black was first introduced in August of 2009 the Product label listed 56 different ingredients, including the Molecule. The ingredients were listed on the back of the bottle in size 6.5 font. Defendants admit that Hemo Rage Black does not, and never did, actually contain the Molecule. Rather, the Product label incorrectly listed the Molecule among the ingredients.

Nutrex asserts that it originally intended to license the Molecule from Plaintiff and to include it in the Product. For one reason or another, the Molecule was not part of the final formulation, but the labels listed it among the ingredients because the labels were designed and produced at a time when Nutrex thought the Molecule would be included in the Product. Thus, according to Nutrex, the inaccurate labels resulted from an inadvertent failure to correct the labels after it determined the Molecule would not be part of the final formulation.

Plaintiff discovered the inaccurate labels soon after Hemo Rage Black was introduced. It initially thought Nutrex was violating its patent for the Molecule but soon discovered that the Molecule was not actually included in the Product. In September of 2009 Plaintiff contacted Nutrex and demanded that it stop distributing the Product with the erroneous labels.

Thereafter, the parties attempted to negotiate a license agreement whereby Nutrex would have paid a fee for use of the Molecule and the Molecule would have been included in the Product. According to Nutrex, Plaintiff sought to receive a fee of four to five dollars per bottle of Hemo Rage Black, an amount Nutrex thought to be unreasonable. Negotiations broke down by the end of March, 2010.

On April 1, 2010 Nutrex removed the reference to the Molecule from its website and other advertising, and had new labels printed for all future manufacturing runs. To correct the faulty labels on existing inventory held in its warehouse, Nutrex crossed out the reference to the Molecule with a black marker. Co-Defendants Vitamin Shoppe, GNC, Europa, and Bodybuilding.com (the "Co-Defendants") also removed all references to the Molecule in their advertising materials. It is unclear whether the Co-Defendants attempted to cross out the reference to the Molecule on the mislabeled bottles they held in inventory.

Plaintiff asserts that it was informed by Nutrex in April of 2010 that all references to the Molecule had been removed from the Product. However, despite Defendants' efforts to correct the faulty references to the Molecule, and despite Nutrex's assertion to Plaintiff, there are still mislabeled bottles in the stream of commerce. In September of 2010 Plaintiff discovered that mislabeled bottles of Hemo Rage Black could be purchased from each of the Co-Defendants.*fn1

Plaintiff filed this action on October 14, 2010, seeking both to prohibit Defendants from selling mislabeled bottles of Hemo Rage Black and to recover damages from past sales. Plaintiff pleads a "vicious blend" of business torts, including: (1) Unfair Competition under Section 43(a) of the Lanham Act; (2) Civil RICO; (3) Tortious Interference with Economic Advantage; (4) Unfair Competition and Misappropriation under N.J.S.A 56:4-1; (5) Common Law Misappropriation; and (6) Accounting.

Defendant asks this Court to dismiss the Complaint, claiming, inter alia, (1) that Plaintiff lacks standing to bring its state and federal unfair competition claims; (2) that Plaintiff has failed to allege facts sufficient to plead its RICO and Tortious Interference claims; and (3) that Plaintiff has failed to allege the necessary fiduciary relationship to support its accounting claim.

II.DISCUSSION

A. Standard of Review

Federal Rule of Civil Procedure 12(b)(6) permits a court to dismiss a complaint for failure to state a claim upon which relief can be granted. When considering a motion under Rule 12(b)(6), the court must accept the factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). The court's inquiry "is not whether plaintiffs will ultimately prevail in a trial on the merits, but whether they should be afforded an opportunity to offer evidence in support of their claims." In re Rockefeller Ctr. Prop., Inc., 311 F.3d 198, 215 (3d Cir. 2002).

The Supreme Court recently clarified the standard for a motion to dismiss under Rule 12(b)(6) in two cases: Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The decisions in those cases abrogated the rule established in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim, which would entitle him to relief." In contrast, the Court in Twombly held that "[f]actual allegations must be enough to raise a right to relief above the speculative level." 550 U.S. at 545. The assertions in the complaint must be enough to "state a claim to relief that is plausible on its face," id. at 570, meaning that the facts alleged "allow[] the court to draw the reasonable inference that the defendant is liable for the conduct alleged." Iqbal, 129 S. Ct. at 1949; see also, Phillips v. County of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008) (in order to survive a motion to dismiss, the factual allegations in a complaint must "raise a reasonable expectation that discovery will reveal evidence of the necessary element," thereby justifying the advancement of "the case beyond the pleadings to the next stage of litigation.").

When assessing the sufficiency of a complaint, the court must distinguish factual contentions -- which allege behavior on the part of the defendant that, if true, would satisfy one or more elements of the claim asserted -- from "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Iqbal, 129 S. Ct. at 1949. Although for the purposes of a motion to dismiss the court must assume the veracity of the facts asserted in the complaint, it is "not bound to accept as true a legal conclusion couched as a factual allegation." Id. at 1950. Thus, "a court considering a ...


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