La Terra Fina USA, LLC v. Resers Fine Foods, Inc.

Background

La Terra Fina USA, LLC and Reser's Fine Foods, Inc. are competitors that manufacture and sell specialty foods, including dips, spreads, and quiches. La Terra Fina brought trade dress infringement and unfair competition claims. Reser's asserted counterclaims for trade dress infringement and unfair competition. La Terra Fina moved to dismiss Reser's third counterclaim, which sought cancellation of a trademark registration based on fraudulent procurement under 15 U.S.C. §§ 1064 and 1119, and Reser's fourth counterclaim for false registration under 15 U.S.C. § 1120.

The court vacated the scheduled hearing and decided the motion without oral argument.

Fraudulent procurement counterclaim

The court applied the Ninth Circuit's standard for pleading fraud in the procurement of a trademark registration rather than the Trademark Trial and Appeal Board's test relied on by the parties. The court explained that a claimant must plead a false representation about a material fact; the registrant's knowledge or belief that the representation was false; an intent to induce reliance; actual and reasonable reliance; and damages caused by that reliance. Because the claim sounds in fraud, Federal Rule of Civil Procedure 9(b) requires the circumstances of the alleged fraud to be stated with particularity, including the who, what, when, where, and how.

Reser's claim was based on La Terra Fina's statement that no other person had the right to use the mark. Reser's alleged, on information and belief, that La Terra Fina knew this was false because certain colors, images, and a white background on three-dimensional food packaging were functional, generic, or descriptive. Reser's also alleged that the specimen submitted with La Terra Fina's application appeared to contain modified portions and to be digitally modified.

The court held that the allegation that La Terra Fina “knew or should have known” it was not the exclusive owner did not adequately plead knowledge that the statement was false. An applicant does not have to disclose every possible user of a mark; the applicant must disclose another user's clearly established conflicting rights, such as rights established by a court decree, settlement agreement, or registration. Reser's did not allege facts supporting an inference that La Terra Fina did not believe its rights were superior or that another user's rights were clearly established. The court also found the allegation about a possibly digitally modified specimen too vague to show knowledge of falsity. The court rejected Reser's argument that reckless disregard was enough under a lower standard adopted by the Trademark Trial and Appeal Board.

The court therefore granted La Terra Fina's motion to dismiss the fraudulent-procurement counterclaim.

False-registration counterclaim

Reser's clarified that its fourth counterclaim sought damages for false registration under 15 U.S.C. § 1120 and conceded that it was based on the same alleged fraud as the fraudulent-procurement counterclaim. Because the court found the underlying fraud allegations inadequately pleaded, it dismissed the related false-registration counterclaim as well.

Leave to amend and case status

The court stated that it could not conclude amendment would be futile. Reser's may amend its counterclaims if it has a good-faith basis to plead the fraud claims consistently with Federal Rule of Civil Procedure 11. The court granted La Terra Fina's motion to dismiss and set May 30, 2024, as the deadline for any amended counterclaim. It also continued the case management conference to June 20, 2024, with an updated joint statement due June 13, 2024. The order states that it disposes of Docket No. 55.