The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION – CINCINNATI
OATLY AB, et al., : Case No. 1:17-cv-840
:
Plaintiffs, : Judge Matthew W. McFarland
:
v. :
:
D’S NATURALS LLC, :
:
Defendant. :
:
______________________________________________________________________________
ORDER OVERRULING OBJECTIONS (Doc. 81) AND AFFIRMING MAGISTRATE
JUDGE’S MEMORANDUM OPINION AND ORDER (Doc. 80)
______________________________________________________________________________
This case is before the Court on Defendant and Counterclaimant D’s Naturals
LLC’s Objections (Doc. 81) to Magistrate Judge Stephanie K. Bowman’s Memorandum
Opinion and Order (Doc. 80) denying leave to file a First Amended and Supplemental
Counterclaim. As discussed below, the Court OVERRULES the Objections because the
Magistrate Judge’s ruling was neither clearly erroneous nor contrary to law.
I. FACTS
The Magistrate Judge’s Opinion and Order sets forth the following background,
none of which is in dispute:
In February 2018, the parties filed their joint Rule 26(f) report, agreeing to
amend pleadings and/or add parties 2 months after the commencement
of discovery, which translated to a deadline of April 7, 2018. (Doc. 18 at
6). On March 1, 2018, the Court entered a Calendar Order that adopted
the parties’ deadline for the amendment of pleadings. (Doc. 21). The
conclusion of discovery was tied to a date six months after the Court’s
ruling on Oatly’s motion to dismiss two of D’s Naturals three original
counterclaims. On July 20, 2018, the undersigned recommended that
Oatly’s motion to dismiss be denied. (Doc. 28). Over objections, the Court
adopted that Report and Recommendation as the ruling of the Court on
September 27, 2018. (Doc. 33).
During the intervening months, the parties engaged in an unsuccessful
court facilitated settlement conference. Based upon delays from the
attempted mediation and the Court’s ruling on Oatley’s motion to
dismiss, on October 18, 2018, the Court granted the parties’ joint motion to
extend many of the prior deadlines. (Docs. 35, 36). Critically, however,
neither party ever sought to extend the deadline to amend their pleadings.
The Court subsequently granted a second joint motion to continue
deadlines (Docs. 37, 38), again without disturbing the long-expired
deadline to amend the pleadings. Oatly later unilaterally moved to
further amend the Calendar Order for some deadlines. (Doc. 40). Over
D’s Naturals strong opposition, the undersigned granted Plaintiffs’
motion to further extend discovery and related expert disclosure
deadlines. (Doc. 50).
In September 2019, D’s Naturals Chicago-based counsel withdrew and
attorneys from a new firm entered their appearance. (Docs. 53-60).
Shortly thereafter, the Court granted a joint motion for a final 21-day
extension to complete previously scheduled depositions, along with a
corresponding extension of the dispositive motion deadline to December
20, 2019. (Doc. 66 and Notation Order of 10/18/19).
Just before the December 2019 dispositive motion deadline, new counsel
for D’s Naturals signaled its intention to seek leave to amend its
counterclaims. (Doc. 68). In response, Oatly sought a further extension of
the summary judgment deadline. Again over D’s Naturals strong
opposition, the Court extended the summary judgment deadline “until
twenty-one (21) days following the date of filing of the Report and
Recommendation disposing of D’s Naturals’ pending motion for leave to
file supplemental and first amended counterclaims.” (Doc. 73). […]
(Doc. 80 at PageID# 1446-47.)
On December 20, 2019, D’s Naturals sought leave to amend its pleading (which
contained three counterclaims) to include twelve additional counterclaims. Magistrate
Judge Bowman found that D’s Naturals failed to demonstrate good cause for modifying
the Court’s scheduling order to allow the proposed amendment under Rule 16 and
denied the motion in its entirety. (Doc. 80.)
In its Objections, D’s Naturals takes issue only with the determination that it had
not shown good cause to add one of its new counterclaims. (Doc. 81.) That
counterclaim is its proposed Counterclaim 4 for abandonment of Oatly’s ‘246 mark. D’s
Naturals argues that the ruling on this counterclaim suffered from three specific errors.
Specifically, it contends that Magistrate Judge Bowman (1) overlooked the standard
applicable to pleading claims of abandonment by non-use against a Section 66(a)
trademark registration; (2) misapplied Rule 15(d) of the Federal Rules of Civil
Procedure; and (3) misconstrued D’s Naturals’ argument from a prior pleading related
to abandonment. The Court addresses each of these asserted errors in turn below.
II. ANALYSIS
The Court must consider timely objections to a magistrate judge’s decision on
non-dispositive matters and “modify or set aside any part of the order that is clearly
erroneous or is contrary to law.” Fed. R. Civ. P. 72(a). The “clearly erroneous”
standard applies to any factual findings in Magistrate Judge Bowman’s order, while
legal conclusions may only be overturned under the “contrary to law” standard. Gandee
v. Glaser, 785 F.Supp. 684, 686 (S.D. Ohio 1992), aff’d, 19 F.3d 1432 (6th Cir. 1994) (table).
A finding is “clearly erroneous” only when the reviewing court is left with the definite
and firm conviction that a mistake has been made. See In re Search Warrants Issued Aug.
29, 1994, 889 F. Supp. 296, 298 (S.D. Ohio 1995) (citations omitted). “A finding is clearly
erroneous when although there is evidence to support it, the reviewing court on the
entire evidence is left with the definite and firm conviction that a mistake has been
committed.” Gaskin v. United States, 782 F. App’x 434, 435 (6th Cir.) (internal quotation
marks omitted), cert. denied, 140 S. Ct. 566, 205 L. Ed. 2d 367 (2019) (quoting United
States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).
A. The Magistrate Judge applied the proper standard for pleading claims
of abandonment.
D’s Naturals’ first argument is that the Magistrate Judge failed to properly apply
the pleading standard for an abandonment claim under Section 66(a) of the Lanham
Act. Section 66(a) permits the owner of an internationally registered trademark to
apply for protection in the United States, which is the case here. See 15 U.S.C. §
1141h(a)(3). To plead a claim for abandonment of such a trademark, the claimant must
allege, as of the date its claim is filed, either:
(a) three or more consecutive years of nonuse commencing no earlier than
the date on which the registration was issued; or,
(b) if the period of non-use commencing no earlier than the date of
registration and extending to the filing date of the claim is less than three
years, facts supporting nonuse after the date of registration, coupled with
an intent not to resume use.
Dragon Bleu (SARL) v. Venm, LLC, 112 U.S.P.Q.2d 1925 (T.T.A.B. 2014); see also Nolan
LLC v. TDC Int’l Corp., No. 06-14907, 2008 WL 11355576, at *2 (E.D. Mich. Mar. 31, 2008)
(“Under Sixth Circuit law in order to succeed on a claim, or affirmative defense, of
abandonment a party must prove the elements of both non-use and intent.”). Thus,
there are two ways to plead the claim. The claimant may plead either (1) that the mark
has not been used for three years or more, at which point the law also presumes an
intent not to use the mark in the future, or (2) that the mark has not been used for a
period of less than three years and an intent not to resume use. All periods must
commence after the date of registration.
Here, Oatly registered the ‘246 mark in September 2016. As of September 2019, it
had not used the mark for three years. D’s Naturals contends that it could not have
pleaded a claim for abandonment before September 2019 because, before that date, it
did not possess facts regarding Oatly’s intent not to use the mark. In other words, D’s
Naturals asserts that it was unable to plead an abandonment claim without the benefit
of the presumption of intent triggered after three years of non-use.
The Magistrate Judge recognized the two different paths to pleading an
abandonment claim. She noted that an abandonment claim may be plead “at any time”
including based on “a period of nonuse of less than three years.” (Doc. 80 at PageID#
1455, quoting Koninkijke Philips Elecs. N.V. Hunt Control Sys., 2016 WL 3545529 at **10-
11, 2016 U.S. Dist. LEXIS 84299 at *31 (D.N.J. June 29, 2016).) D’s Naturals contends that
this is an incorrect statement of law, see Doc. 81 at PageID# 1469, but it is a correct
statement of law so long as the claimant also pleads an intent not to use the mark.
D’s Naturals argues that it did not have the necessary facts to plead the requisite
intent until after it completed document discovery and deposed Oatly’s witnesses in
December 2019, which also coincides with the three-year anniversary of the ‘246 mark’s
registration. This argument, however, incorrectly presumes that a party must have
conclusive evidence of intent to plead a claim of abandonment. Under the federal rules,
a party must plead facts sufficient to state a plausible claim for relief. See Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). This plausibility standard is met when “the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. Accord Disc Disease Sols. Inc. v. VGH Sols., Inc., 888 F.3d 1256,
126 USPQ2d 1494, 1497 (Fed. Cir. 2018). Under Fed. R. Civ. P. 9(b), “intent . . . may be
alleged generally” in pleadings other than those involving fraud or mistake.
While it is not prudent to opine on what factual content would have been
sufficient to withstand a motion to dismiss in this case, the Court may surmise from
cases that have come before the Trademark Trial and Appeal Board that possession of
the defendant’s internal corporate documents and deposition testimony are not
required to plead intent not to resume use. See, e.g., Lewis Silkin, LLP v. Firebrand, LLC,
Trademark L. Guide P 63415 (C.C.H.), 2018 WL 7139511 (T.T.A.B. Dec. 21, 2018)
(petition to cancel trademark alleging that respondent is not using the mark and has no
intent to resume use states legally sufficient abandonment claim). Cf. Dragon Bleu, 112
U.S.P.Q.2d 1925, at *6 (T.T.A.B. 2014) (applicant failed to state a counterclaim for
abandonment where it did not allege any intent not to resume use). Accordingly, the
Magistrate Judge’s determination that D’s Naturals was dilatory in bringing its
counterclaim for abandonment was neither clearly erroneous nor contrary to law.
B. The Magistrate Judge’s order is not contrary to Federal Rule of Civil
Procedure 15(d).
Rule 15(d) of the Federal Rules of Civil Procedure provides that “the court may,
on just terms, permit a party to serve a supplemental pleading setting out any
transaction, occurrence, or event that happened after the date of the pleading to be
supplemented.” D’s Naturals argues that the Magistrate Judge erred in her analysis
under Rule 15(d) by construing the reference to “any transaction, occurrence, or event”
to mean “some type of factual change that could not have been contemplated or
anticipated at the time the initial pleading was served.” (Doc. 81 at PageID# 1472,
quoting Doc. 80 at PageID# 1454.) D’s Naturals argues that Rule 15(d) expressly
permits supplementation to cure a defective pleading and, therefore, it must also permit
supplementation to add claims or defenses that were not totally unforeseen at the time
of the original pleading.
The Magistrate Judge’s decision did not hinge on whether the availability of an
abandonment claim was totally unforeseen. Rather, the Magistrate Judge observed that
Rule 15(d) is often used to permit supplementation where an event occurs that was not
anticipated or contemplated at the time of the initial pleading. Here, however, the
Court was not faced with that situation. More importantly, as the Magistrate Judge also
observed, the Court was not faced with a claim that could not have been pled long
before December 2019, on the eve of the dispositive motion deadline.
Rule 15(d) only permits supplementation “on just terms.” The Magistrate Judge
ultimately decided that permitting supplementation of D’s Naturals’ counterclaim at
such a late stage of the litigation would not be just. In other words, her decision was
consistent with Rule 15(d); it was not contrary to the rule.
C. The Magistrate Judge’s order does not misconstrue D’s Naturals’
statements from an earlier pleading.
D’s Naturals’ last argument is that the Magistrate Judge improperly found that it
had previously made an “express disavowal of its intention to plead an abandonment
claim much earlier in this litigation.” (Doc. 81 at PageID# 1475, quoting Doc. 80 at
PageID# 1457.) D’s Naturals asserts that it “never disavowed, expressly or otherwise,
any claim that might later have factual support.” (Id.)
The Magistrate Judge referred to the parties’ motion to dismiss briefing, in which
they discussed the abandonment claim, to underscore the fact that D’s Naturals was
aware of that claim—and therefore could have pled it—much earlier in the litigation.
The motion to dismiss was fully briefed in March 2018. At the parties’ request, on
March 1, 2018, the Court extended the deadline to amend the pleadings to two months
after the beginning of discovery. As a result, D’s Naturals was not only aware of the
claim but had two months of discovery available to it before expiration of the deadline
to amend its counterclaim. The Magistrate Judge’s referral to D’s Naturals’ decision not
to plead an abandonment claim earlier was not improper. To the contrary, the fact that
the delay in bringing the claim was a choice was relevant to her consideration of
whether to grant leave to amend. As previously noted, an abandonment claim may be
pled before the presumption of intent is triggered by three years of non-use.
Ill. CONCLUSION
As the ruling on D’s Naturals’ motion to supplement or amend its counterclaims
was neither clearly erroneous nor contrary to law, the Court OVERRULES D’s
Naturals’ objections and AFFIRMS the Magistrate Judge’s Memorandum Opinion and
Order (Doc. 80).
IT IS SO ORDERED.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
By: □ RW bel
JUDGE MATTHEW W. McFARLAND