JT IP Holding, LLC v. Florence

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

JT IP HOLDING, LLC, and *

JEFFREY S. ELDREDGE, *

*

Plaintiffs, *

*

v. * Civil Action No. 20-cv-10433-IT

*

THOMAS FLORENCE, FLOPACK, LLC, *

and, KIMBERLY PERRY, *

*

Defendants. *

MEMORANDUM & ORDER

September 1, 2020

TALWANI, D.J.

Before the court is Defendants Thomas Florence, FloPack, LLC, and Kimberly Perry’s

Motion to Dismiss [#27]. For the reasons set forth below, Defendants’ motion is DENIED IN

PART and GRANTED IN PART.

I. Facts Alleged in the Complaint

In 2017, Plaintiff Jeffrey S. Eldredge and Defendant Thomas Florence formed JT IP

Holding, LLC (“JT IP”) to develop and market several products that relate to water management

devices. Am. Compl. ¶ 12 [#22]; Am. Compl., Ex. D, JT IP Operating Agreement 5 [#22-5].

Eldredge and Florence were both members and managers of JT IP and held 50% voting interests

in any and all matters relating to JT IP. Id. ¶ 14. JT IP’s Operating Agreement initially called for

Eldredge to hold a 1/3 ownership stake and Florence to hold a 2/3 ownership stake, with

Eldredge contributing $50,000 in cash and Florence contributing $100,000 in sweat equity and

payment of half of JT IP’s bills and costs. Id. ¶¶ 13, 17. Florence also promised to transfer

several trademarks to JT IP as part of his initial contribution, but failed to do so. Id. ¶¶ 18–23.

Eldredge alleges that during the course of their dealings in JT IP, he and Florence worked

together to improve upon an invention that Florence had previously patented. Id. ¶¶ 33–37. On

January 6, 2018, Florence applied to the United States Patent and Trademark Office (“USPTO”)

for a patent for this new improvement and simultaneously assigned the patent application to JT

IP. Id. ¶¶ 43, 45 (citing Ex. E, Patent Application [#22-6]; Ex. G, Patent Assignment [#22-8]).

The only inventor listed on the patent application is Florence. Id. ¶ 46. Florence represented to

Eldredge that his work on the invention did not warrant Eldredge being listed as an inventor and

that he did not have to be listed as an inventor to protect his interests in the Patent. Id. ¶ 47. On

July 30, 2019, the USPTO issued U.S. Patent No. 10,364,563 (the ’563 Patent) to Florence for

the invention. Id. ¶ 9.

On October 1, 2019, Florence filed a purported assignment of the ’563 Patent to

Defendant FloPack, LLC (FloPack). Id. ¶ 71. FloPack is a Massachusetts company, formed in

October 2019, with a principal place of business in Massachusetts. Id. ¶¶ 4, 77. Kimberly Perry

is an individual residing in Massachusetts, Florence’s daughter, and FloPack’s Member and only

Manager. Id. ¶¶ 5, 77.1 Eldredge was not made aware of this assignment and the assignment was

not approved by Eldredge as required by the JT IP Operating Agreement. Id. ¶¶ 71–74.

In November 2019, after the ’563 Patent was allegedly assigned to FloPack, Eldredge and

Florence met, accompanied by Perry, to discuss the JT IP business and the ownership of the ’563

Patent. Id. ¶ 68. At the meeting, Florence denied that Eldredge had any role in the invention and

1 FloPack’s principal place of business shares the same address as Florence’s residence. See Am.

Compl. ¶¶ 3, 4, 77. [#22].

declined to discuss the assignment of the ’563 Patent to JT IP. Id. ¶ 70. At the time of the

meeting, Eldredge was still not aware that Florence had already purportedly assigned the ’563

Patent to FloPack. Id. ¶ 71.

II. Legal Standard

To survive a motion to dismiss, the well-pleaded facts in Plaintiff’s complaint must “state

a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

(2007). In reviewing a complaint under a Fed. R. Civ. P. 12 motion to dismiss, the court “must

distinguish ‘the complaint’s factual allegations (which must be accepted as true) from its

conclusory legal allegations (which need not be credited).’” Garcia-Catalan v. United States, 734

F.3d 100, 103 (1st Cir. 2013) (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir.

2012)). The plausible factual allegations, taken as true, must ultimately be able to support the

legal conclusion that underlies each claim for relief. See Haley v. City of Boston, 657 F.3d 39,

46 (1st Cir. 2011). Although the court ordinarily only considers the complaint’s plausible factual

allegations on a motion to dismiss, the First Circuit has recognized a narrow exception to this

rule for “documents the authenticity of which are not disputed by the parties; for official public

records; for documents central to plaintiffs’ claim; or for documents sufficiently referred to in the

complaint.” Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993). Here, the parties do not dispute the

authenticity of several of the documents attached to the complaint, including JT IP Holding

LLC’s Operating Agreement [#22-5].

III. Discussion

Defendants make six arguments in their motion to dismiss: (A) that all derivative claims

should be barred, (B) that Eldredge’s inventorship claim is insufficiently pleaded, (C) that

Plaintiffs cannot bring a patent infringement claim, and to the extent they have done so their

pleading is insufficient, (D) that Plaintiffs’ Lanham Act claim is insufficiently pleaded, (E) that

the court should decline to exercise supplemental jurisdiction over the state law claims, and (F),

that Plaintiffs’ pleadings are insufficient as to Defendants Perry and FloPack. The court

addresses these arguments in turn.

A. Whether Eldredge’s Derivative Claims are Proper (Counts II, III, IV, V, VI, VII, XI)

Defendants argue that Eldredge’s derivative claims on behalf of JT IP are improperly

raised since Eldredge has not complied with requirements for bringing derivative actions under

Fed. R. Civ. P. 23.1. Defendants raise three lines of argument: (i) Eldredge has not complied

with Fed. R. Civ. P. 23.1(b)(3)’s requirement that plaintiffs filing derivative suits first make an

effort to obtain the desired action from the directors or comparable authority (the “demand

requirement”); (ii) that Eldredge is not properly positioned to bring this lawsuit under the JT IP

Operating Agreement [#22-5] because the Operating Agreement requires a vote of 100% of the

members before the company takes any action that may bind it; and (iii) that Eldredge cannot

bring claims belonging to the JT IP in his own name. These three arguments are addressed in

turn.

i. Eldredge’s Compliance with FRCP 23.1(b)(3)’s Demand Requirement

Defendants argue that before bringing his derivative action, Eldredge failed to first

exhaust his intracorporate remedies as required by Fed. R. Civ. P. 23.1(b)(3).2 Mem. Supp. Mot.

Dismiss 5 [#28]. Eldredge counters that these claims are properly pleaded since, under the

circumstances present here, the demand requirement can and should be excused since a demand

2 Fed. R. Civ. P. 23.1(b)(3) requires that the complaint must “state with particularity: (A) any

effort by the plaintiff to obtain the desired action from the directors or comparable authority and,

if necessary, from the shareholders or members; and (B) the reasons for not obtaining the action

or not making the effort.” This is often referred to as the “demand requirement.”

would be futile. See Opp. Mot. Dismiss [#29]. The court agrees with Eldredge; here, the demand

requirement should be excused.

Fed. R. Civ. P. 23.1 expressly contemplates that the demand requirement may be excused

for reasons such as futility. Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 96–97 (1991). In

evaluating whether excusal from this pleading requirement is appropriate, courts apply “state law

to determine whether the facts alleged are sufficient to demonstrate that the demand . . . was

adequate or would have been futile and thus should be excused.” Bryceland v. Minogue, No. 13-

cv-10212-FDS, 2013 WL 3208613, at *2 (D. Mass. June 21, 2013) (citing Kamen, 500 U.S. at

96–97). The Massachusetts Supreme Judicial Court has set forth that the demand requirement

gives way where “a majority of directors are alleged to have participated in wrongdoing, or are

otherwise interested” since in such instances the demand would be “futile.” Harhen v. Brown,

730 N.E.2d 859, 865 (Mass. 2000) (citing Bartlett v. New York, N.H. & H.R.R., 109 N.E. 452,

454 (Mass. 1915) (holding plaintiff not required to make demand on board of directors when

demand would be “useless” or “an idle ceremony” because of board’s interested status)).

Here, the allegations set forth in the complaint establish that the demand requirement

would serve no purpose besides mere formality and thus the requirement is subject to being

excused under the standards set forth by the Massachusetts Supreme Judicial Court in Harhen.

730 N.E.2d at 865. The complaint plausibly alleges that Florence engaged in the wrongdoing

identified in the complaint and raises a significant prospect that Florence may be adjudged liable

to the corporation or its shareholders. See id. at 865 & n.5 (adopting definition of “interested”

found in 1 ALI Principles of Corporate Governance: Analysis and Recommendations § 1.23

[1994]). Furthermore, where the demand requirement “protects the court from unnecessarily

hearing a case that is not ripe for decision or that might be mooted by subsequent board action[,]

. . . provides an opportunity for the board to determine if it will pursue other remedies or take

other appropriate corrective actions[,] . . . [and] permits the corporation to take over the suit and

control the litigation,” Plaintiff plausibly alleges the demand requirement would not effectuate its

goals if applied here. Diamond v. Pappathanasi, 935 N.E.2d 340, 351 (Mass. App. Ct. 2010)

(quoting 2 ALI Principles of Corporate Governance: Analysis and Recommendations § 7.03

comment c [1994]); see also Billings v. GTFM, LLC, 867 N.E.2d 714, 720 & n.19 (Mass. 2007)

(finding demand requirement is excused where “complaint also noted the futility of making

demand on the other members that they authorize the company to proceed against them

directly.”). Accordingly, based on the allegations set forth in the Amended Complaint, the court

finds the demand requirement should be excused.

ii. Eldredge’s Authority to Bring a Derivative Action on Behalf of JT IP

Defendants also challenge Eldredge’s authority to bring a derivative action on behalf of

JT IP. Defendants argue that the JT IP Operating Agreement [#22-5] provides that litigation may

only be instituted by unanimous vote of the members and that in the case of a deadlock, the

members must submit to mediation or arbitration to resolve the deadlock (the “ADR provision”).

Mem. Supp. Mot. Dismiss 6 [#28] (citing §§ 5.1, 5.6 of Am. Compl., Ex. D, JT IP Operating

Agreement [#22-5]). Thus, Defendants argue, the court should dismiss the action so that the

parties may pursue ADR on the issue of whether JT IP should proceed with this derivative action

against Florence, as required by the terms of the agreement.

Massachusetts law provides a default rule governing a member or manager’s authority to

bring a derivative action on behalf of an LLC. Mass. Gen. Laws ch. 156C, § 56, provides that

“suit on behalf of the limited liability company may be brought in the name of the limited

liability company” in one of two instances. First, by any member or members of the LLC that

have been authorized to sue by the vote of members who own more than fifty percent of the

LLC. Id. at § 56(a). Second, by any manager or managers of an LLC authorized to sue by the

vote of a majority of the managers. Id. at § 56(b). However, in both instances, the votes of any

member or manager “who has an interest in the outcome of the suit that is adverse to the interest

of the limited liability company shall be excluded.” Id. §§ 56(a) and (b). This provision parallels

“[t]he common-law rule that LLC members are not required to ask other company managers or

members to authorize a suit against themselves, because doing so would be futile.” All Tech

Networking, LLC v. Pryor, No. 1884CV01085BLS2, 2019 WL 2234614, at *3 (Mass. Super.

Apr. 25, 2019) (citing Billings, 867 N.E.2d at 720 & n.19). Once Florence is excluded from the

vote due to his alleged interest in the outcome of the suit, Eldredge represents a majority, indeed

100%, of the LLC membership and is thus authorized to bring the derivative suit pursuant to

Massachusetts law. See Billings, 867 N.E.2d at 720 n.18 (“As the derivative claims were against

all other members of GTFM, all of them had ‘an interest in the outcome of the suit that is adverse

to the interest of the limited liability company.’ . . . Thus Billings would be the only member

eligible under the statute to vote on authorizing a suit against all other members for breach of

fiduciary duty. He impliedly did so by filing the complaint.”).

Defendants argue that these default rules do not govern JT IP since JT IP’s Operating

Agreement has set forth its own rules concerning derivative suits brought by members.

Defendants correctly point out that Massachusetts law allows LLCs broad authority to set forth

their own internal procedures, including restrictions relating to derivative actions. See Mass.

Gen. Laws ch. 156C, § 56 (“Except as otherwise provided in a written operating agreement, suit

on behalf of the limited liability company may be brought in the name of the limited company . .

.”) (emphasis added); see also Billings, 867 N.E.2d at 720 n.18 (noting that the analysis was

based on there being “no provision in the operating agreement related to derivative suits.”);

Williams v. Charles, 996 N.E.2d 475, 478 (Mass. App. Ct. 2013) (holding that the strictures of

Mass. Gen. Laws ch. 156C, § 56 applied where the operating agreement in the case did “not

address authorization of members to bring suit on behalf of [the company].”).

As an initial matter, Defendants’ argument that the Operating Agreement addresses

derivative suits is unconvincing. No portion of the Operating Agreement expressly or implicitly

considers derivative suits. Instead, Defendants point to the general provision governing

management of the LLC. This provision, contained in § 5.1 of the Operating Agreement,

provides: “The Company shall be managed by the Members. No action may be taken by any

Member to bind the Company without the affirmative vote of Members holding 100% of the

Percentages then held by Members.” Am. Compl., Ex. D, JT IP Operating Agreement 13 [#22-

5]. While operating agreements may displace the default statutory rules for who may bring

derivative actions, there is no indication that this general provision was an attempt to limit or

curtail Members’ ability to bring derivative actions. Cf. Williams, 996 N.E.2d at 478 (“The

operating agreement in this case does not address authorization of members to bring suit on

behalf of [the company]. We therefore look to G.L. c. 156C, § 29, to explain the calculation of

the percentages of members with unreturned contributions.”).

Even if the court assumed that the general management provision contained in § 5.1 of

the Operating Agreement constrained the ability for members to bring derivative actions,

Defendants’ argument would still fail since there is no deadlock between the JT IP members that

would trigger the ADR provision contained in § 5.6. The ADR provision provides that either

member of JT IP may require a dispute be referred to arbitration in the case that “any vote is

required on any matter under this Agreement.” Am. Compl., Ex. D, JT IP Operating Agreement

14 [#22-5]. Defendants contend that since there is a dispute between the members as to whether

the derivative action should be brought, Defendant may insist on having that dispute arbitrated.

But, as discussed above, because Florence is an interested party in the outcome of the derivative

action before the court, Florence’s vote is excluded for the purpose of tallying the vote of the

membership vis-a-vis whether Eldredge may initiate this derivative action on behalf of JT IP.

Accordingly, there are “sufficient votes to approve . . . the matter” and § 5.6 of the Operating

Agreement is therefore not implicated. See id.

iii. Whether Eldredge is Improperly Bringing Derivative Claims on his own Behalf

Defendants assert Eldredge cannot bring claims belonging to JT IP in his own name on

behalf of JT IP. Mem. Supp. Mot. Dismiss 7 [#28]. But Defendants only lodge a wholesale

objection without identifying any specific claim that Eldredge is improperly alleging on behalf of

himself instead of derivatively on behalf of JT IP. Nor is it readily apparent that Eldredge has

improperly brought a claim on his behalf that belongs to JT IP. Eldredge’s inventorship claim

(Count I) relates to harm he—rather than JT IP—suffered. See Am. Compl. ¶ 90 [#22]. Likewise,

Counts V, VIII, IX, and X—the other claims brought on behalf of Eldredge individually—are

supported with allegations of Eldredge’s individualized injuries, not only harms to JT IP. See id.

¶¶ 129, 134, 138–39. While some of Plaintiffs’ claims are supported with a bare recital of facts,

see, e.g., id. ¶¶ 114–17 (stating “Florence owed Plaintiffs a fiduciary duty,” and that his breach

of these duties will and has caused “Plaintiff to suffer damages”), Defendants do not present any

specific argument as to the sufficiency of these claims.

For these reasons, the court concludes that Eldredge’s derivative actions on behalf of JT

IP are properly pleaded.3

B. Whether Eldredge’s § 256 Correction of Inventorship Claim is Sufficiently Pleaded

(Count I)

Defendants allege Eldredge failed to sufficiently plead his 35 U.S.C. § 256 Correction of

Inventorship claim since named inventors are “presumed to be the true and only inventors” and

Plaintiff has failed to put forth allegations that carry his “heavy burden of proving [their

coinventorship] by clear and convincing evidence.” Mem. Supp. Mot. Dismiss 7 [#28] (citing

Rubin v. Gen. Hosp. Corp., No. 09-cv-10040-DJC, 2011 WL 1625024, at *4 (D. Mass. Apr. 28,

2011), aff’d, 523 F. App’x 719 (Fed. Cir. 2013); Shum v. Intel Corp., 633 F.3d 1067, 1083 (Fed.

Cir. 2010)). But Defendants’ recitation of these cases, which set forth plaintiffs’ burden at trial,

is of no relevance to whether Plaintiff here has met the pleading requirements of Fed. R. Civ. P.

8(a)(2).

To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must “set

forth factual allegations, either direct or inferential, respecting each material element necessary

to sustain recovery under some actionable legal theory.” Gooley v. Mobil Oil Corp., 851 F.2d

513, 515 (1st Cir. 1988). Here, to prevail on a § 256 Correction of Inventorship claim, a joint

inventor must establish that he or she:

“(1) contribute[d] in some significant manner to the conception or reduction to practice of

the invention, (2) ma[de] a contribution to the claimed invention that is not insignificant

in quality, when that contribution is measured against the dimension of the full invention,

3 In subsequent sections of their argument, Defendants re-raise this same issue with regard to

individual claims. For example, in Part C, infra, Defendants argue that Eldredge’s derivative

patent infringement claim brought on behalf of JT IP is improperly pleaded for the reasons

discussed here. The court does not address these subsequent arguments since they are redundant

with the analysis in this section.

and (3) d[id] more than merely explain to the real inventors well-known concepts and/or

the current state of the art.

Pannu v. Iolab Corp., 155 F.3d 1344, 1351 (Fed. Cir. 1998). Defendants argue that “[t]he

Amended Complaint contains only the (false) allegation that Eldredge and Florence ‘worked

together.’” Mem. Supp. Mot. Dismiss 8 [#28]. That is not true. Eldredge alleges that while

working together on the invention over a long period, he gave the credited inventor, Florence,

specific information and conceptual insights that Florence did not have, which were then used as

part of the conception of the ’563 Patent—namely, “Eldredge [came] up with the idea to

internalize the components of the diverter box to, in part, make it easier to manufacture, ship, and

install.” Am. Compl., ¶ 35 [#22]. Although these allegations do not establish that Plaintiff will

prevail on his inventorship claim, they do set forth, directly or inferentially, plausible allegations

as to each element of the claim and are therefore sufficient at this stage of the proceeding. Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007) (“Asking for plausible grounds does not

impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a

reasonable expectation that discovery will reveal evidence [of a right to relief]”).

C. Whether JT IP’s Patent Infringement Claim is Properly Pleaded (Count III)

Defendants assert JT IP’s patent infringement claim must be dismissed (i) because “there

is no basis for the allegation that the Patent itself was assigned to JT IP,” and (ii) as JT IP failed

to allege sufficient facts. Mem. Supp. Mot. Dismiss, 10–11 [#28]. The two arguments are

addressed in turn.

i. Whether JT IP Has Sufficiently Alleged Ownership Rights to the ’563 Patent

Defendants’ argument that there is “no basis” for Eldredge’s contention that JT IP has

ownership rights to the ’563 Patent is contradicted by the factual allegations and documents

attached to the Amended Complaint. Id. The gist of Defendants’ argument appears to be that

“only the application to the Patent was assigned to JT IP, not the Patent itself.” Mem. Supp. Mot.

Dismiss 3 [#28] (emphasis in original). But, by its terms, Florence’s 2018 assignment of the ’563

Patent Application to JT IP, “assign[ed] and transfer[ed] unto said assignee [JT IP] the full and

exclusive right to the said invention, and the entire rights, title and interest in and to any and all

Patents which may be granted therefore, anywhere in the world.” Am. Compl., Ex. G, Patent

Assignment 2–3 [#22-8]. The USPTO’s Manual of Patent Examining procedure also contradicts

Defendants’ position; it states that,

[a]n assignment of a patent, or patent application, is the transfer to another of a party’s

entire ownership interest or a percentage of that party's ownership interest in the patent

or application. In order for an assignment to take place, the transfer to another must

include the entirety of the bundle of rights that is associated with the ownership interest,

i.e., all of the bundle of rights that are inherent in the right, title and interest in the patent

or patent application.

301 Ownership/Assignability of Patents and Applications (R-07.2015), MPEP § 301 (2018)

(emphasis in original); see also Opp. Mot. Dismiss, 3 [#29]. Thus, Defendants’ argument that JT

IP has alleged no ownership rights of the ’563 Patent is without merit.

ii. Whether JT IP Has Sufficiently Pleaded Infringement Against Defendants

FloPack and Perry

Defendants contend that Plaintiffs’ patent infringement claim fails to allege sufficient

facts as to Defendants FloPack and Perry. Mem. Supp. Mot. Dismiss 11 [#28]. Specifically,

Defendants contend that besides noting that Perry “attended certain meetings, without detail[,]”

and that “FloPack was the assignee of the Patent,” the “Amended Complaint contains only

speculative and conclusory statements about Perry’s knowledge.” Id. Thus, Defendants argue,

the complaint fails to comply with Plaintiffs’ pleading standards under Fed. R. Civ. P. 8(a)(2).

Defendants do not accurately portray the substance of the factual allegations contained in

the complaint. First, Plaintiffs allege Perry knew about the Patent. See Am. Compl. ¶ 68 [#22]

(“On November 5, 2019, Eldredge and Florence met, along with counsel and . . . Kimberly Perry

to discuss the business of JTIP, the ownership of the patent by JTIP as per their agreement, the

question of inventorship, and the disputes outlined herein”). Since Perry is the sole manager of

FloPack, id. ¶¶ 5, 77, her knowledge plausibly indicates defendant FloPack knew of the ’563

Patent as well.4 Second, Plaintiffs allege that Defendants wrongly assigned the ’563 Patent to

FloPack and that Perry (and thus FloPack) was aware that the purported assignment was

wrongful. Id. ¶¶ 71–74, 82. Third, Plaintiffs allege that FloPack and Perry are now infringing on

JT IP’s rights to the ’563 Patent by “making, using, offering for sale, selling, distributing” what

is claimed in the ’563 Patent. Id. ¶ 104.

Plaintiffs’ pleading requirement is to “state a claim to relief that is plausible on its

face” and to do so in a manner that “give[s] the defendant fair notice of what the . . . claim is and

the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (alteration in

original) (quotation marks omitted) (quoting Twombly, 550 U.S. at 555). Plaintiffs’ pleading

requirements are no different in cases where Plaintiffs allege patent infringement. See Disc

Disease Sols. Inc. v. VGH Sols., Inc., 888 F.3d 1256, 1260 (Fed. Cir. 2018) (reversing a district

court’s grant of a motion to dismiss where the Circuit found that the complaint and attachments

were “enough to provide [defendant] fair notice of infringement of the asserted patents.”).

Here, the allegations contained in the complaint are plausible on their face. Furthermore,

they plainly convey to Defendants that the Plaintiffs are alleging that Defendants knowingly

misappropriated the ’563 Patent and are now willfully infringing on that patent, directly and/or

indirectly, by making, distributing, and/or selling the patented technology. Defendants are now

4 Plaintiffs’ allegation that Florence assigned the ’563 Patent to FloPack also plausibly indicates

FloPack’s awareness; FloPack’s attorney’s email and FloPack’s physical address were on the

assignment, and FloPack was likely notified of the assignment. Am. Compl., Ex. H, 2–3 [#22-9].

on notice of the plausible allegations and can defend them on the merits. Accordingly, the

allegations satisfy Plaintiffs’ obligations under Fed. R. Civ. P. 8(a)(2) and thus are not subject to

dismissal.

D. Whether Plaintiffs have Sufficiently Alleged the Lanham Act Claim (Count II)

The Amended Complaint alleges that by “misrepresenting the ownership of the ’563

Patent to customers, potential customers, and potential investors” the ’563 Patent is being

represented to the marketplace in a false and misleading manner that tends to deceive and create

confusion in violation of § 43(a) of the Lanham Act. Am. Compl. ¶¶ 95–97 [#22].

Defendants argue Plaintiffs’ Lanham Act claim should be dismissed because the Act

prohibits only misrepresentations in commercial advertising or promotions and Plaintiffs have

supported their allegation of such misrepresentations with facts only pleaded “upon information

and belief.” Mem. Supp. Mot. Dismiss at 9–10 [#28]; see also Am. Compl., ¶ 95 [#22].

“Pleading ‘upon information and belief’ is not fatal under Twombly.” Aspen Tech., Inc.

v. Walter, No. 19-cv-11292-GAO, 2019 WL 4795551, at *4 (D. Mass. Sept. 12, 2019). Instead,

allegations rooted in “information and belief” can helpfully fill the interstitial voids in a

complaint that exist between those allegations that are rooted in precise knowledge or

recollection. In this way, references to “information and belief” assist both the parties and the

court by allowing the complaint to clearly differentiate those things known to be true and those

things for which there is reason to believe the assertion’s accuracy. Courts have found that

allegations based upon “information and belief” survive an analysis under Twombly where (1)

the facts are peculiarly within the possession and control of the defendant, or (2) the belief is

based on factual information that makes the inference of culpability plausible. See Lexington Ins.

Co. v. Johnson Controls Fire Prot. Ltd. P’ship, 347 F. Supp. 3d 61, 64 n.1 (D. Mass. 2018)

(citing Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010) and Menard v. CSX

Transp., Inc., 698 F.3d 40, 44–45 (1st Cir. 2012)).

Plaintiffs’ Amended Complaint, as pleaded, satisfies neither consideration. The facts

pleaded upon information and belief are that “Defendants are misrepresenting the ownership of

the ’563 Patent to customers, potential customers, and potential investors.” Am. Compl. ¶ 95

[#22]. While Defendants may be better positioned to have this information, the court does not

find the alleged misrepresentations here to constitute facts that are “peculiarly within the

possession and control of the defendant” given the allegations concern representations made in

advertising and promotion as opposed to insular activities where the facts may be “peculiarly”

hard to come by. Furthermore, the facts that are alleged in the Amended Complaint do not make

the inference of culpability plausible. Plaintiffs’ allegation rests on the “[t]he Certificates of

Organization of Perry’s companies . . . coupled with the IP claimed by FloPack.” Id. at ¶ 101.

While these allegations, by themselves, may be consistent with culpable conduct, they are not

enough to make an inference of culpability a plausible one. For these reasons, Plaintiffs’ Lanham

Act claim fails to state a claim and is subject to dismissal without prejudice.

E. Whether the Court Should Exercise Supplemental Jurisdiction over Plaintiffs’ State Law

Claims

Defendants’ argument that the court should decline to exercise its supplemental

jurisdiction is premised on this court first “dismiss[ing] all claims over which it has original

jurisdiction.” Mem. Supp. Mot. Dismiss 11–12 [#28]. Because, for the reasons set forth above,

Plaintiffs will proceed with at least some of their federal claims, Defendants’ argument

concerning the appropriateness of the court continuing to exercise supplemental jurisdiction over

the ancillary claims is no longer applicable.

F. Whether Plaintiffs have Alleged Sufficient Facts with Respect to Claims Against FloPack

and Perry5

Defendants claim Plaintiffs have failed to allege sufficient facts with respect to their

claims against FloPack and Perry. Mem. Supp. Mot. Dismiss 12 [#28]. But Defendants provide

little more than the conclusory statement that the claims are deficient. See id. Further,

Defendants understate the relevant facts pleaded as they relate to FloPack and Perry. Defendants

state in the pleading that “Plaintiffs allege that Perry attended certain meetings to discuss the

business of JT IP,” id., but fail to note the allegations relevant to Plaintiffs’ claims against these

two defendants; inter alia, Perry is Florence’s daughter, Am. Compl., ¶ 5 [#22], Perry is

FloPack’s only member, see id., and that the meetings she attended included discussion of the

contested patent, id. ¶¶ 64, 68. These allegations provide a plausible basis for the alleged claims

and therefore Defendants’ motion to dismiss Plaintiffs’ claims against these two defendants is

denied.

IV. Conclusion

For the reasons set forth above, Defendants’ Motion to Dismiss [#27] is GRANTED as to

Count II, but otherwise DENIED.

IT IS SO ORDERED.

Date: September 1, 2020 /s/ Indira Talwani

United States District Judge

5 Defendants also argue in this section that the claims against FloPack and Perry should—with

the exception of the Lanham Act and patent infringement claims—be dismissed under their

supplemental jurisdiction analysis. This argument appears redundant with their Part E claim;

here, as there, Defendants’ motion to dismiss on these grounds is denied. See supra Part E.