United States District Court, D. Oregon
H. Angeli, Kristen L. Tranetzki, ANGELI LAW GROUP LLC Michael
Rounds BROWNSTEIN HYATT FARBER SCHRECK, LLP Attorneys for
Anthony J. DiMarino, III Emmett S. Collazo A.J. DIMARINO,
Jennifer Wagner STOLL STOLL BERNE LOKTING & SCHLACHTER
Attorneys for Defendant
OPINION & ORDER
A. HERNÁNDEZ UNITED STATES DISTRICT JUDGE.
brings three claims against Defendant: (1) false advertising
under the Lanham Act, 15 U.S.C. § 1125(a); (2) unlawful
trade practices in violation of Oregon Revised Statute §
(O.R.S.) 646.608; and (3) breach of contract. Defendant moves
to dismiss Plaintiff's claims. The Court held oral
argument on March 10, 2017.
Court grants Defendant's motion to dismiss
Plaintiff's Claims 1 and 2 for failure to state a claim.
The Court denies Defendant's motion to dismiss
Plaintiff's Claim 3 for lack of personal jurisdiction.
The Court also denies Defendant's alternative motion to
transfer venue. In sum, Plaintiff's third claim for
breach of contract can proceed in this Court.
Akers Biosciences, Inc. (“Defendant”) is a New
Jersey corporation with its principal place of business in
West Deptford, New Jersey. Akers Decl. Supp. Def.'s Mot.
Dismiss (“Akers Decl.”) ¶ 8, ECF 19.
According to Defendant, it develops and sells diagnostic
products and devices designed to deliver various health
information test results with laboratory-level accuracy, but
with cheaper and faster results. Id. at ¶ 5.
Defendant is publicly held, with common stock traded on the
NASDAQ Exchange and London Stock Exchange. Id. at
has no place of business in Oregon and has no employees in
Oregon. Id. at ¶¶ 7, 10, 11. However, on
October 4, 2016, Defendant engaged an independent sales
representative in Oregon for marketing and selling the
OxiChek product at issue in this case. Id. at ¶
15. Defendant also engages independent sales distributors
that have made sales to a hospital in Corvallis, Oregon,
totaling less than $15, 000 since 2013. Id. at
Pulse Health LLC (“Plaintiff”) is an Oregon
limited liability company with its principal place of
business in Lake Oswego, Oregon. Compl. ¶ 1, ECF 1.
Plaintiff formed in 2006 for the purpose of developing a
product that can measure aldehyde molecules in human breath
via a non-invasive hand-held device. Marsh Decl. ¶ 3,
ECF 28. In pursuit of that goal, Plaintiff invented a
hand-held computer system that could be used to measure
certain health markers, such as aldehyde molecules, via a
breath test. Compl. ¶ 9. Plaintiff had initially called
this product the “Free Radical Enzymatic Device”
or “FRED, ” but later changed the name of the
device to “Revelar.” Id. at ¶¶
9, 18. Plaintiff currently employs fourteen people at its
Portland, Oregon facility. Id. at ¶ 3.
in September of 2007, Plaintiff and Defendant entered into a
number of contracts for the development and manufacture of a
breath tube containing a chemical reagent that could
accurately measure aldehyde molecules in human breath, to be
used in conjunction with Plaintiff's FRED/Revelar device.
Id. at ¶¶ 8-15; Marsh Decl. ¶ 9.
Defendant had previously invented a test kit for a Blood
Alcohol Test which took the form of a tube containing
chemical reagents into which the test-taker would blow air.
Compl. ¶ 10. The chemical reagents would react and
change color based upon their interaction with alcohol
present in the breath. Id. Defendant also invented
another tube-and-reagent test that it claimed could detect
the product of “free radical metabolism, such as
aldehydes, MDA or peroxides, and react such substances with a
compound producing a color.” Id. The parties
entered into a Technology and Development Agreement
(“TD Agreement”) pursuant to which Defendant
would design “New Versions” of its free radical
test product in order for it to be used in combination with
Plaintiff's hand-held FRED product. Id. at
addition to the TD Agreement, the parties simultaneously
entered into a Supply and Manufacturing Agreement
(“Supply Agreement”). The Supply Agreement
provided that Defendant would manufacture the New Versions
for Plaintiff to sell with its FRED/Revelar product if
Defendant successfully developed and tested the New Versions
of the free radical test tubes. Id.
relationship between the parties and the circumstances
surrounding the development of the New Versions changed in
the following year. In December 2008, the TD Agreement and
Supply Agreement were terminated in a Technology Transfer
Agreement (“TT Agreement”). Id. at
¶ 12. Under the TT Agreement, Defendant assigned all
intellectual property rights in the “Assigned
Technology” to Plaintiff. Id. at ¶ 13.
The “Assigned Technology” included all technology
related to non-invasive exhaled breath testing. Id.
The TT agreement provided Defendant with a license to use the
Assigned Technology in the “ABI Field” which was
limited to a handful of breath-test products related to
diabetes, lung cancer, and alcohol detection. Id. at
the TT agreement, Defendant agreed to complete research,
development, and testing for the “Free Radical
Technology” and Plaintiff agreed to pay a transfer fee
of $3, 000, 000 in periodic payments through June of 2010.
Id. The TT Agreement included an amended version of
the previous Supply Agreement and provided for
Defendant's potential manufacture and sale of the
“FRED Aldehyde Assay Tubes” (apparently the new
moniker for the New Versions of Defendant's aldehyde test
development of the test tubes failed, according to Plaintiff.
Id. at ¶ 16. Plaintiff determined in its
testing laboratory that the chemical reagents developed by
Defendant did not work. Id. According to Plaintiff,
when the reagents in the tube changed color in reaction to a
user's breath, the reagents were not detecting aldehydes,
as they were supposed to. Id. Instead, the change in
color in the tube (which the hand-held device reads to
determine the amount of aldehyde molecules in the breath) was
actually a result of the reagents reacting with humidified
air (i.e. water) in the breath. Id. After
Plaintiff determined that Defendant could not develop Free
Radical Technology that successfully tested for accurate
measurement of aldehydes in breath condensate, Plaintiff
requested to part ways with Defendant. Id. The
parties subsequently terminated all prior agreements between
each other and entered into the April 8, 2011 Assignment,
License, and Settlement Agreement (“Settlement
Agreement”) at issue in this action. Id. at
Settlement Agreement provided that Plaintiff assigned and
transferred the Assigned Technology back to Defendant, and
Defendant waived the remainder of Plaintiff's $3, 000,
000 payment. Id. at ¶ 17. The Settlement
Agreement also provided that Defendant granted Plaintiff an
exclusive and perpetual license to use the Assigned
Technology in the field of Aldehyde Tests, which included any
testing for oxidative stress, but excluded the
“Defendant Field” of tests relating to diabetes,
cancer, and alcohol. Id. The Settlement Agreement
further provided that Defendant had no rights with respect to
Plaintiff's Technology for its hand-held FRED/Revelar
device. Id. at ¶ 18.
approximately May of 2012, Plaintiff became aware that
Defendant was selling a hand-held “Vivo” product
that Defendant claimed measured oxidative stress and free
radical damage through disposable tubes, which Plaintiff
determined was a copy of Plaintiff's FRED/Revelar product
in several respects. Compl. ¶ 19; Marsh Decl. ¶ 17.
One of the former sales agents of Plaintiff was attempting to
sell the Vivo product to Plaintiff's Oregon-based
customers, and Plaintiff's law firm sent that former
agent a cease-and-desist letter. Marsh Decl. ¶ 17. Both
Defendant and the former sales agent thereafter stopped
selling the Vivo product. Id.
December 2015, Plaintiff became aware that Defendant was
offering an “OxiChek” product for sale at a trade
show in Las Vegas. Id. at ¶ 21. The Oxi-Check
device uses a hand-held reader device in which a chemical
reagent tube (the OxiChek product) is inserted after a person
has exhaled breath into it. Compl. ¶ 21. The OxiChek
device is supposed to measure free radicals such as
superoxides, hydrogen peroxide, and aldehydes, and then send
the results to a software application downloaded on a
person's mobile phone or computer. Id. The
software then displays oxidative stress and free radical
reviewing Defendant's OxiChek advertising materials,
Plaintiff sent Defendant a cease-and-desist letter on March
1, 2016, complaining that Defendant may be using the Assigned
Technology and Plaintiff's technology in breach of the
parties' Settlement Agreement. Id. at ¶ 22.
Plaintiff requested Defendant's technical materials
showing the composition of its chemical reagents.
Id. Defendant refused to remove its product from the
market or provide any information concerning its OxiChek
product. Id. at ¶ 23.
of 2016, Plaintiff obtained a sample of the OxiChek product
by purchasing it from one of Defendant's distributors.
Id. at ¶ 24. After analyzing the device,
Plaintiff determined that the OxiChek product is a copy of
the Assigned Technology and Pulse Technology. Id.
The chemistry for the OxiChek and the Assigned Technology
reagents are the same, and the circuit boards for the OxiChek
product have a similar layout and the same optical chamber,
LED, diodes, switches and gates as the original FRED/Revelar
device developed by Plaintiff. Id. at ¶¶
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) tests the sufficiency of the claims. Navarro v.
Block, 250 F.3d 729, 732 (9th Cir. 2001). “All
allegations of material fact are taken as true and construed
in the light most favorable to the nonmoving party.”
Am. Family Ass'n, Inc. v. City & Cnty. of
S.F., 277 F.3d 1114, 1120 (9th Cir. 2002). However, the
court need not accept conclusory allegations as truthful.
See Warren v. Fox Family Worldwide, Inc., 328 F.3d
1136, 1139 (9th Cir. 2003) (“[W]e are not required to
accept as true conclusory allegations which are contradicted
by documents referred to in the complaint, and we do not
necessarily assume the truth of legal conclusions merely
because they are cast in the form of factual
allegations.”) (internal quotation marks, citation, and
alterations omitted). Rather, to state a plausible claim for
relief, the complaint “must contain sufficient
allegations of underlying facts” to support its legal
conclusions. Starr v. Baca, 652 F.3d 1202, 1216 (9th
motion to dismiss under Rule 12(b)(6) will be granted if a
plaintiff alleges the “grounds” of his
“entitlement to relief” with nothing “more
than labels and conclusions, and a formulaic recitation of
the elements of a cause of action[.]” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007).
"Factual allegations must be enough to raise a right to
relief above the speculative level on the assumption that all
the allegations in the complaint are true (even if doubtful
in fact)[.]” Id. (citations and footnote
survive a motion to dismiss, a complaint “must contain
sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face[, ]” meaning
“when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant
is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (internal quotation
marks omitted). A complaint must contain “well-pleaded
facts” which “permit the court to infer more than
the mere possibility of misconduct[.]” Id. at
Federal Rule of Civil Procedure 12(b)(2), a defendant may
move to dismiss on the grounds that the Court lacks personal
jurisdiction. Personal jurisdiction over an out-of-state
defendant involves two questions: whether jurisdiction exists
under the forum state's long-arm statute and, if so,
whether asserting personal jurisdiction is consistent with
the limitations of the Due Process Clause of the federal
Constitution. Witt Co. v. RISO, Inc., 948 F.Supp.2d
1227, 1248 (D. Or. 2013) (citing Pebble Beach Co v.
Caddy, 453 F.3d 1151, 1155 (9th Cir. 2006)). These
inquiries essentially merge because Oregon's long-arm
statute extends jurisdiction to the outer limits of due
process. ORCP 4(L); Harris Rutsky & Co. Ins. Servs.
v. Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th
Cir. 2003) (when state long-arm statute reaches as far as the
Due Process Clause, the court need only analyze whether the
exercise of jurisdiction complies with due process);
Millennium Enters., Inc. v. Millennium Music, LP, 33
F.Supp.2d 907, 909 (D. Or. 1999) (because Oregon's
catch-all jurisdictional rule confers personal jurisdiction
coextensive with due process, the analysis collapses into a
single question and the court proceeds under federal due
Process Clause “protects an individual's liberty
interest in not being subject to the binding judgments of a
forum with which he has established no meaningful contacts,
ties, or relations.” Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 471-72 (1985) (internal
quotation marks and citation omitted). To satisfy this due
process protection, the plaintiff must show that the
defendant has “at least ‘minimum contacts'
with the relevant forum such that the exercise of
jurisdiction ‘does not offend traditional notions of
fair play and substantial justice.'” Boschetto
v. Hansing, 539 F.3d 1011, 1015-16 (quoting
Int'l Shoe Co. v. Washington, 326 U.S. 310, 316
motion to transfer venue is governed by 28 U.S.C. §
1404(a), which provides that “[f]or the convenience of
the parties and witnesses, in the interest of justice, a
district court may transfer any civil action to any other
district or division where the action might have been
brought[.]” The purpose of 28 U.S.C. § 1404(a) is
to “prevent the waste of time, energy and money and to
protect litigants, witnesses, and the public against
unnecessary inconvenience and expense[.]” Van Dusen
v. Barrack, 376 U.S. 612, 616 (1964) (internal citation
and quotation marks omitted).
motion to transfer lies within the broad discretion of the
district court and must be determined on a case-by-case
basis. See Jones v. GNC Franchising, Inc., 211 F.3d
495, 498 (9th Cir. 2000). However, the burden is on the
moving party to demonstrate that the balance of conveniences
favoring the transfer is high. The defendant must make
“a clear showing of facts which . . . establish such
oppression and vexation of a defendant as to be out of
proportion to plaintiff's convenience, which may be shown
to be slight or nonexistent.” Dole Food Co. v.
Watts, 303 F.3d 1104, 1118 (9th Cir. 2002).
employ a two-step analysis when determining whether transfer
is proper. First, a court must ask “whether the
transferee district was one in which the action might have
been brought by the plaintiff.” Hoffman v.
Blaski, 363 U.S. 335, 343-44 (1960). Second, if the
moving party has made this threshold showing, courts may
consider “individualized, case-by-case consideration[s]
of convenience and fairness.” Stewart Org., Inc. v.
Ricoh Corp., 487 U.S. 22, 29 (1988) (quoting Van
Dusen, 376 U.S. at 622).
ruling on motions to transfer based on § 1404(a), the
court may consider undisputed facts outside of the
pleadings.” Palmer Events, LLC v. Hyundai Hope on
Wheels, No. 3:15-CV-02223-PK, 2016 WL 1179857, at *1 (D.
Or. Feb. 26, 2016), F&R adopted, No.
3:15-CV-02223-PK, 2016 WL 1181679 (D. Or. Mar. 25, 2016);
accord Samson Tug & Barge Co. v. Koziol, 869
F.Supp.2d 1001, 1015 (D. Alaska 2012) (citing Gherebi v.
Bush, 352 F.3d 1278, 1302 (9th Cir. 2003)).
brings three claims against Defendant: (1) false advertising
under the Lanham Act, 15 U.S.C. § 1125(a); (2) unlawful
trade practices in violation of O.R.S. 646.608; and (3)
breach of contract. Defendant moves to dismiss all of
Plaintiff's claims for lack of personal jurisdiction.
Alternatively, Defendant moves to transfer venue.
Additionally, Defendant moves to dismiss Plaintiff's
Claims 1 and 2 for failure to state a claim.
Court finds that Plaintiff's Claims 1 and 2 should be
dismissed for failure to state a claim and, thus, the
analysis below addresses those claims first. As to
Plaintiff's Claim 3, this Court has personal jurisdiction
over the claim and declines Defendant's alternative
motion to transfer venue.
Motion to Dismiss Claims 1 and 2 for Failure to State a
moves to dismiss Plaintiff's false advertising claims,
Claims 1 and 2, for failure to state a claim. The Court
grants Defendant's motion and, because amendment would be
futile, dismisses the claims with prejudice.
Plaintiff's first claim alleges that Defendant engaged in
false advertising, in violation of the Lanham Act, 15 U.S.C.
§ 1125(a). Plaintiff lacks Lanham Act standing to bring
its claim because Plaintiff is not within the zone of
interests protected by the statute and there is no proximate
causation between Plaintiff's alleged injury and the
alleged statutory violation. Thus, the Court dismisses
Supreme Court has established a two-part test to determine
whether a plaintiff can bring a cause of action under the
Lanham Act. See Lexmark Int'l, Inc. v. Static Control
Components, Inc., 134 S.Ct. 1377, 1388-89 (2014). First,
the Court must determine whether the plaintiff comes within
the “zone of interests”; that is, whether the
plaintiff has a cause of action under the substantive
statute. Ray Charles Found. v. Robinson, 795 F.3d
1109, 1120-22 (9th Cir. 2015). The Lexmark court
looked to the statement of the Lanham Act's purposes and
observed “the Act's goal of protecting persons
engaged in commerce within the control of Congress against
unfair competition, ” and of redressing “injuries
to business reputation and present and future sales.”
Lexmark, 134 S.Ct. at 1389-90 (alterations and
internal quotation marks omitted). It thus held that
“to come within the zone of interests in a suit for
false advertising under § 1125(a), a plaintiff must
allege an injury to a commercial interest in reputation or
sales” as opposed to an allegation that a consumer or
business was misled into purchasing disappointing or inferior
products. Id. at 1390.
second requirement to bring suit for false advertising under
Section 1125(a) of the Lanham Act is a “proximate cause
requirement.” Id. The Court asks
“whether the harm alleged has a sufficiently close
connection to the conduct the statute prohibits.”
Id. “In the context of the Lanham Act's
prohibition on false advertising and unfair competition, the
Court held ‘that a plaintiff suing under § 1125(a)
ordinarily must show economic or reputational injury flowing
directly from the deception wrought by the defendant's
advertising; and that that occurs when deception of consumers
causes them to withhold trade from the plaintiff.'”
Id. at 1391.
argues that Plaintiff's claim does not fall within the
zone of interests of the Lanham Act because Plaintiff fails
to allege an injury to a commercial interest in reputation or
sales. Plaintiff responds that its allegations of commercial
injury fit squarely within the zone of interests of Section
alleges that Defendant copied technology that it knew
Plaintiff exclusively licensed, owned, and had been using
since 2011. Compl. ¶ 6, 24. In addition, Plaintiff
alleges that Defendant knowingly made false statements in
advertising the technology's ability to detect levels of
oxidative stress or free radicals. Id. at ¶ 27.
Thus, according to Plaintiff, its claim is within the Lanham
Act's zone of interests because Defendant made knowing
misrepresentations in the advertisement of a product that
competes with the technology used by Pulse. Plaintiff alleges
that it has been damaged by Defendant's false advertising
“in an amount not less than $500, 000.” Compl.
Plaintiff fails to allege any injury to a commercial interest
in reputation or sales. Plaintiff argues that
“ABI's advertisement serves to misguide the same
market and consumer base that Pulse targets with its
technology” and cites Obesity Research Inst., LLC
v. Fiber Research Int'l, LLC, 165 F.Supp.3d 937, 946
(S.D. Cal. 2016) in support of its argument that its
allegations suffice to state a claim. Plaintiff is correct
that both this case and Obesity Research dealt with
situations in which a defendant's allegedly false
representations about its product misled the same customers
targeted by the plaintiff. However, in Obesity
Research, the plaintiff expressly alleged it had been
injured in its ability to sell its product because the
defendant was selling a sub-standard product and passing it
off as the superior product sold by the plaintiff. 165
F.Supp.3d. at 947. Here, in contrast, Plaintiff does not
allege any injury.
reliance on POM Wonderful LLC v. Coca-Cola Co., 134
S.Ct. 2228, 2234 (2014), is similarly misplaced. POM did not
merely claim, as Plaintiff does, that its competitor
deceptively marketed a product to consumers. Instead, POM
alleged that the misleading advertisements caused it to lose
sales. POM Wonderful, 134 S.Ct. at 2235. Such an
allegation of an injury to a commercial interest in
reputation or sales is lacking in Plaintiff's complaint.
from other circuits confirm that Plaintiff must allege an
injury to its reputation or sales in order to state a claim.
In Belmora LLC v. Bayer Consumer Care AG, the
plaintiff's claim fell within the Lanham Act's zone
of interests because it alleged that it had lost sales
revenue due to the defendant's deception of consumers,
distributors, and vendors. 819 F.3d 697, 711 (4th Cir. 2016).
In contrast, in Global Tech LED, LLC v. Hilumz Int'l
Corp., the district court dismissed the plaintiff's
Lanham Act claim because nothing in the pleading indicated
that the plaintiff had ever been injured. No.
2:15-CV-553-FTM-29CM, 2016 WL 3059390, at *3 (M.D. Fla. May
31, 2016) (“Neither an anticompetitive purpose nor
consumer deception establishes injury.”); see also
Die-Mension Corp. v. Dun & Bradstreet Credibility
Corp., No. C14-855 TSZ, 2015 WL 5307472, at *4 (W.D.
Wash. Sept. 10, 2015) (plaintiff not within Lanham Act's
zone of interests because there was no allegation of harm to
reputation or diminished sales).
argument, Plaintiff stressed that it could allege an injury
based on harm to future sales. Plaintiff submits the
declaration of Chris Marsh, Plaintiff's President and
CEO. Marsh Decl. ECF 28. Mr. Marsh attests that Plaintiff
“has spent more than $20, 000, 000 developing its
Revelar product since the inception of the company and has
filed numerous patent applications on its proprietary
technology.” Id. at ¶ 6. Mr. Marsh
declares that “Pulse will be the first company to
successfully develop and sell such a product to physician and
other end consumers.” Id. According to Mr.
Marsh, “Pulse has recently completed the most current
prototype of its Revelar product and will be selling it first
in Europe and then in the United States beginning in the
second quarter of 2017.” Id. at ¶ 7.
Plaintiff argues that, by the time ...