Sulzer Mixpac AG v. DXM Co. Ltd.

Background

Sulzer Mixpac AG manufactures a system for mixing two-part dental adhesives, including mixing tips sold in distinctive colors known as the “Candy Colors.” Mixpac obtained U.S. trademark registrations covering use of those colors on several products.

Mixpac previously sued DXM Co., Ltd. and Dentazon Corporation over allegedly infringing mixing tips. The parties resolved that litigation through a confidential 2016 Settlement Agreement and a 2016 consent judgment that permanently prohibited the defendants from selling products that allegedly infringed Mixpac’s Candy Color trademarks. Mixpac later alleged that the defendants resumed producing, marketing, and selling infringing products. In this case, Mixpac asserted claims for breach of the settlement agreement, enforcement of the consent injunction, trademark infringement, counterfeiting, false design origin, and unfair competition. The court issued a 2020 preliminary injunction barring the defendants from selling, distributing, or advertising mixing tips bearing the Candy Colors.

The Second Circuit later held in a different case involving Mixpac’s Candy Colors that the colors were functional because they identified mixing-tip diameter and therefore were not protectable trade dress. The Supreme Court denied review of that decision.

Defendants’ Motion for Judgment on the Pleadings

Defendants sought judgment on the pleadings, a procedure decided under the same standard as a motion to dismiss for failure to state a claim. They argued that the Second Circuit’s functionality ruling required dismissal of Mixpac’s trademark-related claims and undermined the settlement agreement and injunctions.

The court applied defensive nonmutual collateral estoppel, which prevents a party from relitigating an issue that it previously had a full and fair opportunity to contest and that was finally decided. The court held that Mixpac was barred from relitigating whether the Candy Color marks were functional because that issue had been actually litigated and finally decided in the Second Circuit case. Accordingly, Defendants’ motion for judgment on the pleadings was granted in part as to Counts III through VI, and those counts were dismissed with prejudice except as to U.S. Trademark No. 4,051,261, the non-color dome-shape trademark.

The court denied Defendants’ motion as to Count VII, the New York common-law unfair-competition claim, because Defendants did not provide a specific argument or supporting authority explaining why the Second Circuit’s decision required judgment on that claim.

The court also denied Defendants’ motion as to Counts I and II, which alleged breach of the 2016 Settlement Agreement and the 2016 Consent Injunction. The court held that neither document depended on the validity or non-functionality of the Candy Color trademarks. The agreement and injunction did not state that their enforceability would end if the trademarks were later found invalid or functional. The court therefore held that the later functionality ruling did not eliminate the parties’ settlement obligations.

Motion to Vacate the Injunctions and Rescind the Settlement

Defendants sought relief under Federal Rule of Civil Procedure 60(b), which allows a court to relieve a party from a judgment or order in limited circumstances, including when continued prospective enforcement is no longer equitable or when another reason justifies relief. The court described Rule 60(b) relief as disfavored and available only in exceptional circumstances.

The court denied Defendants’ motion to vacate the 2016 Consent Injunction and the 2020 Preliminary Injunction. It also denied Defendants’ motion to rescind the 2016 Settlement Agreement. The court reasoned that the 2016 agreement and injunction were not based on an understanding that the Candy Color marks were valid. It further held that the 2020 preliminary injunction rested on the likelihood that Defendants had violated the settlement agreement, not on the likelihood that Mixpac would prevail on trademark-infringement claims. The court found no exceptional circumstances warranting relief.

Mixpac’s Motion Concerning Counterclaims and Affirmative Defenses

The court granted Mixpac’s motion to dismiss Counterclaim I, which sought a declaration of non-infringement, because it was a mirror image of Mixpac’s infringement claims and the court’s ruling eliminated any future threat of trademark-infringement litigation concerning the Candy Colors. Counterclaim I was dismissed with prejudice.

The court granted Mixpac’s motion to dismiss Counterclaim II, which sought a declaration that the Candy Color marks were functional. That counterclaim was dismissed with prejudice except as to U.S. Trademark No. 4,051,261.

The court held that res judicata, the rule barring claims that could have been raised in an earlier action, did not bar Counterclaims III through V. Those counterclaims relied in part on conduct occurring after the 2016 settlement, and the settlement agreement expressly allowed Defendants to assert defenses and counterclaims in response to later infringement claims.

The court dismissed Counterclaims III and IV in part under Rule 12(b)(6), which addresses whether a pleading states a legally sufficient claim. Counterclaim III alleged antitrust violations, and Counterclaim IV alleged unfair competition. The court held that Mixpac’s trademark litigation was not objectively baseless and therefore was protected by the Noerr-Pennington doctrine, which generally protects efforts to petition the government through litigation. Those counterclaims were dismissed with prejudice as to allegations that Mixpac’s trademark litigation was a sham. They were dismissed without prejudice as to allegations that Mixpac illegally attempted to secure or maintain a monopoly, including by attempting to coerce Defendants to sign consent judgments.

The court dismissed Counterclaim V, alleging interference with business relations, with prejudice. Defendants alleged that Mixpac contacted eBay and identified their color-coded mixing-tip products as counterfeits or infringements, after which the products were removed from eBay. The court held that Defendants did not adequately allege that Mixpac used improper means, acted solely to injure them, or committed an independent crime or tort. The court noted that a trademark owner may advise others of its trademark rights and warn about possible infringement.

The court struck Defendants’ Second Affirmative Defense, which asserted that the trademarks were invalid because the Candy Color features were functional, as moot except as to U.S. Trademark No. 4,051,261. The court granted Mixpac’s motion to dismiss the Sixth Affirmative Defense, which asserted unclean hands, because Defendants did not identify the conduct allegedly supporting that defense.

Disposition

Judge Preska’s order granted Defendants’ motion for judgment on the pleadings as to Counts III through VI and denied it as to Counts I, II, and VII. The order denied Defendants’ motions to vacate the 2016 and 2020 injunctions and to rescind the 2016 Settlement Agreement. It granted Mixpac’s motions concerning Counterclaims I and II, granted in part and denied in part the motion concerning Counterclaims III and IV as specified above, dismissed Counterclaim V with prejudice, struck Affirmative Defense II as moot except as to U.S. Trademark No. 4,051,261, and granted Mixpac’s motion to strike Affirmative Defense VI.