Muddy Bites, Inc. v. Evergreen USA LLC, d/b/a Just The Fun Part

Background

Muddy Bites and Evergreen sell similar bite-sized chocolate-filled waffle-cone snacks. Muddy Bites sued Evergreen, claiming infringement of its registered mini-cone trade dress and other alleged trademarks. Evergreen counterclaimed for cancellation of Muddy Bites’ trademark registration based on alleged fraud, tortious interference with contracts and business relationships, and attempted monopolization under Section 2 of the Sherman Act.

Evergreen alleged that Muddy Bites obtained its Principal Register trademark registration after submitting a sworn statement that the mini-cone design had become distinctive through substantially exclusive and continuous use for at least five years. According to Evergreen, Muddy Bites knew that other companies, including Evergreen, sold comparable products, making the statement knowingly false. Evergreen further alleged that Muddy Bites used the registration, its lawsuit, and communications with Evergreen’s customers to interfere with Evergreen’s sales. Evergreen identified Target as a customer that canceled certain orders after the communications and alleged that similar communications caused other losses.

Muddy Bites moved under Rule 12(b)(6), which asks whether the pleading states enough facts for a legally plausible claim, to dismiss Evergreen’s tortious-interference and attempted-monopolization counterclaims.

Noerr-Pennington defense

Muddy Bites argued that the First Amendment doctrine known as Noerr-Pennington protected its efforts to petition the government and courts, including its trademark enforcement lawsuit. The court explained that the doctrine generally protects such petitioning from antitrust and related liability, but that protection may not apply when the activity is a sham—such as an objectively baseless lawsuit or conduct involving fraudulent misrepresentations.

The court declined to dismiss the counterclaims on this basis. It held that the complaint did not clearly establish that Evergreen’s claims were legally barred. If Muddy Bites knowingly made fraudulent statements to the Patent and Trademark Office, its alleged petitioning activity might fall within the sham exception. The court concluded that factual questions remained and could not be resolved on this motion.

Tortious interference

The court discussed two theories under New York law. For tortious interference with contract, Evergreen had to allege a valid contract with a third party, Muddy Bites’ knowledge of it, intentional procurement of an unjustified breach, an actual breach, and resulting damages. The court found that Evergreen did not identify the relevant contract terms, including the terms of its relationship with Target, and did not adequately allege an actual breach rather than a lawful termination or cancellation of orders.

For tortious interference with a business relationship, Evergreen had to identify a relationship with a specific third party, interference, wrongful or improper conduct, and injury. The court held that Evergreen adequately pleaded a claim concerning Target by alleging an ongoing relationship, intentional interference through Muddy Bites’ emails, and resulting injury. Accepting Evergreen’s allegations as true at this stage, the court also found sufficient allegations that the communications relied on rights Muddy Bites knew were unenforceable because they were allegedly obtained through fraud.

The court held that Evergreen had not sufficiently pleaded a business-relationship claim concerning customers other than Target because it did not identify those customers or provide relevant supporting facts.

Attempted monopolization

The court rejected Muddy Bites’ argument that Evergreen’s antitrust counterclaim was inadequately pleaded. Evergreen relied on the Walker Process theory, which can support a monopolization claim when a party knowingly and deliberately obtains intellectual-property rights through fraud and then uses them in anticompetitive conduct. The court noted that applying this theory to trademarks may be appropriate when the registration covers a generic or functional product design that could create significant exclusionary power.

Evergreen alleged that Muddy Bites fraudulently obtained its mini-cone trademark, enforced it through litigation and customer outreach, and attempted to exclude competitors. The court held that these allegations were sufficient at the pleading stage to allege fraudulent procurement and anticompetitive conduct with a specific intent to monopolize.

Evergreen identified the relevant market as the United States mini-cone snack market. The court found that market definition plausible and held that Evergreen had pleaded enough facts to allege a dangerous probability that Muddy Bites could obtain monopoly power. The court therefore declined to dismiss the attempted-monopolization counterclaim.

Disposition

The court’s conclusion states that it granted Muddy Bites’ motion to dismiss with respect to Evergreen’s tortious-interference claims concerning unnamed customers and denied the motion in all other respects. The court granted Evergreen leave to amend its pleading and denied Muddy Bites’ request for fees and costs.