Declaratory Judgment Suit Based on Latches Survives Motion for Judgment on Pleadings

Hi-Tech Pharmaceuticals, Inc. v. ProCaps Laboratories, Inc., Civil Action No. 1:21-cv-05187-WMR (N.D. Ga. June 29, 2022)

Hi-Tech Pharmaceuticals, Inc., a manufacturer of dietary supplements for fat burning and weight loss, filed a declaratory judgment suit against competitor and dietary supplement retailer ProCaps Laboratories, Inc. in the Northern District of Georgia on ____. In the Complaint, Plaintiff alleges that it is the owner of the registered “CARNISLIM” mark and has been using that mark in commerce in connection with its products since at least March 2017. Defendant, in a cease and desist letter sent to Plaintiff in October 2021, claims that it has used the name “Carnislim” in connection with dietary supplements since 2003. In filing suit, Plaintiff Hi-Tech sought a declaration that ProCaps’ claims regarding the CARNISLIM mark are barred by the doctrine of latches. ProCaps asserted several affirmative defenses and counterclaims in answering the Complaint. Hi-Tech answered with its own affirmative defenses, including that ProCaps’ counterclaims are barred by the doctrine of latches. On ___, Defendant ProCaps filed a motion for partial judgment on the pleadings, arguing that Hi-Tech’s claim for declaratory judgment and related affirmative defenses on the issue of latches should be dismissed. Plaintiff opposed the motion and moved for leave to amend its complaint. The case is assigned to Judge Ray, and the Court held a hearing on June 8, 2022.

In an order dated June 29, 2022, the Court denied ProCaps’ motion for judgment on the pleadings and granted Hi-Tech’s motion for leave to amend the complaint. To survive a motion for judgment on the pleadings on its latches claim, Hi-Tech had to demonstrate three factors: (1) that ProCaps delayed in asserting a right or claim, (2) that ProCaps’ delay was not excusable, and (3) that there was undue prejudice to Hi-Tec based on ProCaps’ delay. Although there is no statute of limitations in the Lanham Act, the Court used the four-year statute of limitations applied to analogous state law claims for latches in O.C.G.A. 9-3-31. In denying ProCaps’ motion and taking Hi-Tech’s allegations as true, the Court found that Hi-Tech plausibly alleged that ProCaps delayed in asserting a right or claim to the CARNISLIM mark and that ProCaps’ delay was inexcusable. Hi-Tech alleged that it has been using the CARNISLIM mark in connection with its products, which are “widely advertised and sold” across the United States since 2017, and that Hi-Tech’s use was “easily discoverable by an internet search.” As a result, ProCaps knew or should have known about Hi-Tech’s use more than four years before it sent the cease and desist letter. Additionally, Hi-Tech alleged that it “expended substantial resources to develop, promote, brand, market, sell, and maintain the qualify of its CARNISLIM product” and would therefore be unduly prejudiced by ProCaps’ delayed claim to the mark. The Court further rejected ProCaps argument that Hi-Tech had to allege “the specific monetary amount it invested in the CARNISLIM mark” at this stage, noting that it could “justifiably infer [from the Complaint] that Hi-Tech incurred substantial economic costs from its years of investments in the mark.” And, while it is true that “a latches defense is unavailable in situations where confusion between the two marks is inevitable,” the Court found it was “inappropriate to make that determination at this stage of the case.”

When it came to ProCaps’ motion for judgment on the pleadings for Hi-Tech’s affirmative defenses of latches, statute of limitations, waiver, and acquiescence, the Court found it to be a closer call. Noting the split in the Eleventh Circuit over whether affirmative defenses are subject to the heightened pleading standards of Iqbal and Twombly, the Court ultimately “agree[d] with those district courts that have found that affirmative defenses are not subject to the heightened pleading standard.” Even if the heightened pleading standard did apply, the Court found Hi-Tech’s allegations were sufficiently pled as they were based on the same set of facts as Hi-Tech’s declaratory judgment claim. Although the Court found Hi-Tech’s original complaint was sufficient to state a claim, the Court allowed Hi-Tech leave to amend its complaint to add additional facts about Hi-Tech’s use of the CARNISLIM mark, ProCaps’ delay in asserting a claim to the mark, and Hi-Tech’s investments in the mark.

Categories: Trademark

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