BuzzBallz, LLC v. MPL Brands NV, Inc.

Background

BuzzBallz sued MPL Brands NV, Inc., doing business as Patco, alleging trademark, trade-dress, and patent infringement. BuzzBallz later withdrew its claim concerning U.S. Patent No. 11,738,904 (the “’904 Patent”) and executed a broad agreement promising not to sue Patco or certain related businesses over that patent.

Patco asserted five counterclaims:

BuzzBallz moved to dismiss all five counterclaims under Federal Rule of Civil Procedure 12. For some counterclaims, it argued that the court lacked subject-matter jurisdiction. For others, it argued that Patco had not alleged enough facts to state a legally viable claim.

Patent-related declaratory counterclaims

The court concluded that Counterclaim 1, seeking a declaration that the ’904 Patent was invalid, and Counterclaim 3, seeking a declaration that the patent was unenforceable because of inequitable conduct, were moot. BuzzBallz’s covenant not to sue covered all past, present, and future Patco products and protected Patco’s manufacturers, suppliers, distributors, and customers. The court found that the covenant made it clear there was no continuing dispute over the patent’s validity or enforceability.

The court also rejected Patco’s argument that its request for attorney’s fees under 35 U.S.C. § 285 kept the inequitable-conduct counterclaim alive. The court stated that a fee request does not restore an otherwise moot dispute. It also concluded that Patco was not a prevailing party on the ’904 Patent infringement claim because BuzzBallz had withdrawn that claim by amending its complaint without a court order, and the court had not approved a change in the parties’ legal relationship concerning that claim. The court therefore did not decide whether BuzzBallz had engaged in inequitable conduct.

The court granted the motion without leave to amend as to Counterclaims 1 and 3. It described those counterclaims as dismissed without prejudice for lack of subject-matter jurisdiction and without leave to amend in this action.

Attempted monopolization and Walker Process fraud

The court granted the motion with leave to amend as to Counterclaim 4. Patco alleged that BuzzBallz committed Walker Process fraud by obtaining the ’904 Patent through fraud on the Patent and Trademark Office and then using the patent in litigation. Patco also alleged that BuzzBallz coordinated other litigation and sent cease-and-desist letters to Patco’s business partners.

The court held that Patco had not plausibly alleged a relevant geographic market or a sustainable relevant product market. Patco described the product market as small-format ready-to-drink cocktails of 250 milliliters or less, but the court found that the allegations did not explain why larger ready-to-drink cocktails were excluded even though they could be economic substitutes. The court also held that Patco had not plausibly alleged a dangerous probability that BuzzBallz would obtain monopoly power because Patco did not adequately allege market barriers or other facts supporting that conclusion.

The court further held that Patco’s allegations about coordinated litigation and cease-and-desist letters were protected by Noerr-Pennington immunity, which generally shields litigation activity from antitrust liability unless the litigation is objectively baseless. Patco had not alleged that the relevant litigation or the claims in the letters were objectively baseless. The court did not decide whether Patco had adequately pleaded the elements of Walker Process fraud because the market and monopoly-power deficiencies independently required dismissal.

Although the court found it doubtful that Patco could cure all the defects, it granted leave to amend because this was its first ruling on the legal sufficiency of that counterclaim. The court stated that it would dismiss the counterclaim with prejudice if a third amended counterclaim failed to plausibly state a claim.

Cybersquatting

The court denied the motion as to Counterclaim 5. Patco alleged that BuzzBallz registered “bigsipz.com” and “bigsipzcocktails.com,” names similar to Patco’s “Big Sipz” mark, and redirected visitors to BuzzBallz’s website.

Under the Anticybersquatting Consumer Protection Act, Patco had to plausibly allege that BuzzBallz registered, used, or trafficked in a domain name that was identical or confusingly similar to a protected mark and acted with bad-faith intent to profit from that mark. BuzzBallz argued that Patco had not used “Big Sipz” in commerce before the domain names were registered. The court found that argument premature at the motion-to-dismiss stage. Patco alleged that it marketed Big Sipz products to distributors and retail partners beginning in February 2022, before BuzzBallz registered the second domain name. The court concluded that these allegations plausibly supported use of the mark in commerce and denied dismissal of the cybersquatting counterclaim.

Unfair competition

The court denied the motion as to Counterclaim 2. Patco relied on the same domain-name conduct to support its claim under California’s Unfair Competition Law. Because the court found that Patco plausibly alleged a violation of the federal cybersquatting statute, it also found a plausible “unlawful” unfair-competition claim. The court did not need to decide whether Patco also adequately alleged unfair or fraudulent conduct.

Order

In BuzzBallz, LLC v. MPL Brands NV, Inc., Judge Umi K. Lee granted BuzzBallz’s motion without leave to amend as to Counterclaims 1 and 3, granted the motion with leave to amend as to Counterclaim 4, and denied the motion as to Counterclaims 2 and 5. The court ordered Patco to file amended counterclaims consistent with the order within fourteen days and to file a redlined version showing the changes.