By: Franklin M. Smith and John S. Artz

John S. Artz (Member, Troy) and Franklin M. Smith (Associate, Troy) recently defeated a motion to dismiss a Dickinson Wright client’s complaint for unfair competition.

The Defendants, ZURU, Ltd. and ZURU, Inc. (collectively, “ZURU”) are global toy distributors. In spring 2017, ZURU sent communications to various third party toy retailers asserting it owned intellectual property rights in a Lego tape product and, in view of these rights, the third parties should not engage in business with Dickinson Wright’s client, Ontel Products Corp. (“Ontel”). On behalf of Ontel, Dickinson Wright filed suit in United States District Court for the District of New Jersey against ZURU (Case No. 3:17-cv-3658), alleging unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a), common law unfair competition, tortious interference with a prospective business advantage, and unjust enrichment. In sum, Ontel asserted that Zuru lacked any such intellectual property rights and its communications were simply intended to interfere with Ontel’s existing business relationships.

ZURU moved to dismiss Ontel’s complaint on the basis that its statements to third parties were protected under the Noerr-Pennington doctrine. The Noerr-Pennington doctrine arises from anti-trust law, where it allows competitors to exercise their right to petition the government and avoid liability for the anti-competitive effect associated with the petitioning activity. The doctrine has since been extended, on a limited basis, to offer protection outside of the anti-trust arena. This can include, for example, petitions in the form of filing a complaint and other legitimate activity associated with or incidental to filing of a complaint (e.g., demand letters). Here, ZURU asserted its correspondences to third party retailers amounted to conduct incidental to a petition, and therefore the Noerr-Pennington doctrine immunized ZURU from the significant business harm caused to Ontel.

After the conclusion of written briefing and oral argument, the Court recently held that the Noerr-Pennington doctrine does not apply to shield ZURU for at least three reasons that Dickinson Wright argued. First, the Court found no evidence suggesting that ZURU petitioned the government for any redress. Second, Ontel’s Complaint against ZURU explicitly alleges that ZURU does not hold any registered intellectual property rights as asserted in its correspondences to third party retailers and ZURU failed to present any evidence to the contrary. Finally, ZURU failed to rebut the assertion that the communications to third party retailers are not akin to a doctrine that protects conduct between competitors when petitioning government. For all of these reasons, the Court denied ZURU’s motion and the case will move forward into fact discovery.

About the Authors:
John S. Artz has more than twenty five years of experience and practices in all areas of intellectual property litigation. He also has extensive experience with the acquisition, management, and prosecution of patent, trademark, copyright, and trade secret assets. He serves and has served as lead counsel for many companies in federal courts across the country, including the Federal Circuit Court of Appeals. John may be reached in our Troy office at 248-433-7262.

Franklin Smith has extensive experience with researching and drafting complaints, answers, briefs, summary judgment and other dispositive and non-dispositive motions, stipulations, settlement agreements, protective orders, claim charts, Markman briefs and hearing presentations, inter partes review petitions and patent owner responses, and ex parte re-examination requests in patent, trademark, and copyright litigation.  Franklin may be reached in our Troy office at 248-433-7393.