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Oatly AB v. D's Naturals LLC

United States District Court, S.D. Ohio, Western Division

July 20, 2018

OATLY AB, et al., Plaintiffs,
v.
D'S NATURALS LLC, Defendants.

          Barrett, J.

          REPORT AND RECOMMENDATION

          STEPHANIE K. BOWMAN UNITED STATES MAGISTRATE JUDGE

         Plaintiffs Oatly AB and Oatly, Inc. (together “Oatly”) filed suit against Defendant D's Natural's LLC (“D's Natural's”), alleging infringement of its registered “WOW NO COW!” trademark under the Trademark Act of 1946 (the “Lanham Act”), as amended, unfair competition pursuant to 15 U.S.C. § 1125(a), and related claims under state law and common law. (Doc. 1). Defendant D's Naturals filed both an answer and counterclaims under the Lanham Act. (Doc. 7).

         This case has been referred to the undersigned to rule on all nondispositive pretrial motions, and to recommend disposition of all dispositive pretrial motions. (Doc. 5). Currently pending is Plaintiff's motion to dismiss two of Defendant's three asserted counterclaims. (Doc. 16). Defendant filed a response in opposition to the motion to dismiss, to which Plaitniff filed a reply. (Docs. 20, 23). For the reasons that follow, I now recommend that Oatley's motion to dismiss the counterclaims be DENIED.

         I. Background As Alleged in Pleadings [[1]]

         Oatly AB is a Swedish company; Oatly Inc. is a U.S. division of Oatly AB. (Doc. 1 at ¶2-3). Oatly alleges that it sells a nondairy milk product made from oats under the WOW NO COW! trademark. Plaintiff further alleges that it extended protection of its trademark in the United States to include multiple other goods including but not limited to oat-based foodstuffs, such as processed oats, oatmeal, muesli, bread, biscuits, pastry, oat cakes, oat-based biscuit mixes, pancakes, waffles, liquid pancake batter, and other foods and beverages based on oats. (See generally Doc. 1 at ¶¶9-16).

         D's Naturals also offers nondairy food products. On October 31, 2014, D's Naturals filed a trademark application for NO COW, in connection with goods identified as fruit-based meal replacement bars, nut-based snack bars, vegetable-based raw food bars, and vegetable based snack foods. (Doc. 1 at ¶ 24). On May 31, 2017, D's Naturals filed an “intent to use” trademark application for NO COW in connection with additional goods that included a powdered drink mix containing protein, soy protein for use as a nutritional supplement in various powdered and ready-to-drink beverages, nut-butters, cookies, brownies, various types of cereal bars and sports beverages. (Doc. 1 at ¶25). However, on August 30, 2017, the United States Patent and Trademark Office (“USPTO”) issued an Office Action that preliminarily refused Defendant's registration as to some of the requested food products. (Doc. 1 and Doc. 7 at ¶26). On October 17, 2017, D's Naturals filed two separate “intent to use” trademark applications for both NO COW & Design, and for “NO COW. NO BULL. NO WHEY!” in connection with a variety of foods and drinks. (Doc. 1 and Doc. 7 at ¶¶27-28). In addition, D's Naturals filed a trademark application for NO COW. NO BULL. NO WHEY! asserting a first date of use as October 6, 2015 in connection with certain foods and drinks. (Docs. 1, 7 at ¶ 29).

         Oatly's complaint alleges that D's Naturals is liable for trademark infringement and related causes of action based upon the marketing and/or sale of dairy free products to American consumers using the marks of “NO COW” and/or “NO COW, NO BULL, NO WHEY.” (See generally Doc. 1 at ¶¶ 22-44). In addition to raising affirmative defenses of estoppel, laches, acquiescence and priority in its answer, D's Naturals has asserted three counterclaims. D's Naturals specifically alleges that Oatley “did not have a bona fide intention to use [its alleged trademark] in U.S. commerce for some or all of the identified goods, and “submitted the declaration of its bona fide intention to use the mark…with willful intent to deceive the USPTO to obtain a registration for WOW NO COW! covering goods that it does not offer in the United States and did not…intend to offer in the United States.” (Doc. 7 at ¶¶ 10-11). D's Naturals sets forth all three of its counterclaims based upon “information and belief, ” citing its “reasonable investigation into Oatley's business and offerings, ” including product information listed on Oatley's international and U.S. websites. (See id. at ¶12).

         In its first counterclaim, captioned as “Cancellation or Partial Cancellation of Trademark Registration - No Bona Fide Intent to Use (15 U.S.C. §1119)”, D's Naturals asserts that the Plaintiff's trademark WOW NO COW! is subject to cancellation for lack of bona fide intention to use the mark. D's Naturals further alleges that this Court has the authority to order cancellation pursuant to 15 U.S.C. § 1119, and that the willful and intentional nature of Oatley's conduct make this an exceptional case under 15 U.S.C. § 1117(a). (Doc. 7 at ¶¶ 17-18). Importantly, Oatly's motion to dismiss does not seek dismissal of D's Naturals' first counterclaim as stated.

         Instead, Oatley seeks to dismiss, for failure to state a claim under Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, D's Naturals' second and third counterclaims, both of which assert that Oatly committed fraud on the USPTO. Like the first counterclaim, D's Naturals' second counterclaim seeks cancellation or partial cancellation under § 1119, but is captioned: “Cancellation or Partial Cancellation of Trademark Registration - Fraud on the USPTO.” Consistent with the first counterclaim, the second counterclaim focuses on the declaration submitted by Oatley in connection with its U.S. Trademark Application and re-alleges that Oatley had no bona fide intention to use the mark “for some or all of the identified goods, including but not limited to bread, biscuits and pastry.” However, the second counterclaim adds that Oatly “submitted the false declaration with a willful intent to deceive the USPTO.” (Doc. 7 at ¶¶21, 22). Based upon the allegedly “willful and intentional nature of Oatly's conduct, ” D's Naturals reiterates this is an exceptional case under 15 U.S.C. § 1117(a).

         D's Naturals' third counterclaim is filed under 15 U.S.C. § 1120 and seeks “Civil Liability for False or Fraudulent Registration.” The relevant provision, also referred to as Section 38 of the Trademark Act, states: “Any person who shall procure registration in the Patent and Trademark Office of a mark by a false or fraudulent declaration or representation, oral or in writing, or by any false means, shall be liable in a civil action by any person injured thereby for any damages sustained in consequence thereof.” 15 U.S.C. § 1120. To support its third counterclaim, D's Naturals relies upon the same allegations and adds that Oatley procured its trademark “by a false or fraudulent representation or by false means as described above, ” and that as a result, “D's Naurals has suffered and continues to suffer damages in an amount to be determined.” (Doc. 7 at ¶¶ 27-28).

         II. Analysis

         A. Motion to Dismiss Standard

         Unlike a motion for summary judgment, a motion to dismiss is directed to the sufficiency of the pleadings, with the Court's review to be limited accordingly. When considering a motion to dismiss under Rule 12(b)(6), the court is required to construe the complaint in the light most favorable to the Plaintiff and to accept all well-pleaded factual allegations in the complaint as true. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) and Lewis v. ACB Business Services, 135 F.3d 389, 405 (6th Cir. 1998). A court, however, will not accept conclusions of law or unwarranted inferences which are presented as factual allegations. Blackburn v. Fisk University, 443 F.2d 121, 124 (6th Cir. 1974). Instead, a complaint must contain either direct or reasonable inferential allegations that support all material elements necessary to sustain a recovery under some viable legal theory. Lewis v. ACB, 135 F.3d at 405 (internal citations omitted). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted); Association of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 ...


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