The opinion of the court was delivered by: Judge Blanche M. Manning
Plaintiff/Counterdefendant Big Dipper, Inc. moves to strike Defendant/Counterplaintiff Wells' Dairy, Inc.'s ("Wells") counterclaim. Wells seeks Rule 11 sanctions against Big Dipper for filing the motion to strike. Along with its motion for sanctions, Wells has filed a supporting affidavit from its counsel, which affidavit Big Dipper has moved to strike. For the reasons stated below, the motion to strike the counterclaim is denied and the motion for sanctions is denied. Further, Big Dipper's motion to strike the affidavit is also denied.
Big Dipper filed the instant action alleging that Wells has infringed its trademark (United States Trademark Registration No. 2,209,362). Wells, on the other hand, contends that the trademark is invalid and unenforceable. Wells has alleged counterclaims that Big Dipper has abandoned its trademark and that Big Dipper filed a fraudulent Declaration of Excusable NonUse with the United States Patent and Trademark Office ("PTO") to maintain the registration.
Wells has made similar contentions in a petition to cancel the '362 trademark in an action before the Trademark Trial and Appeal Board ("TTAB"), which it filed in 2003. Before the PTO, Big Dipper submitted Declarations of Excusable Non-Use regarding the trademark at issue. The PTO accepted these declarations and extended the registration of the trademark for another ten years. According to Wells, it filed a letter of protest with the PTO challenging the acceptance of Big Dipper's supplemental Declaration of Excusable non-use, but the PTO never ruled on the letter. According to an affidavit filed by Wells' counsel, the PTO told her that the rules do not allow for a letter of protest to be filed against an existing registration. Wells counsel's affidavit goes on to state that the PTO told her that the only options she had were to either seek cancellation before the TTAB or seek cancellation in federal court. As such, Wells states that it is pursuing its attempts to have the trademark registration cancelled both before the TTAB as well as in this court.
Big Dipper filed a motion to strike the counterclaim pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). Big Dipper's motion to strike contains two different bases for dismissal. First, its opening motion relies on a res judicata-claim preclusion argument while its reply argues that Wells failed to exhaust its administrative remedies before the PTO and therefore, Wells cannot seek relief in this court. Although Big Dipper initially raised the failure to exhaust theory in its reply brief, Wells was able to respond to it due to the way briefing occurred. Specifically, Big Dipper filed its motion to strike the counterclaim. Wells then filed its motion for sanctions, and Big Dipper subsequently filed a reply in support of its motion to strike/response to the motion for sanctions. Finally, Wells filed a reply in support of its motion for sanctions which addressed the substantive issues raised by Big Dipper in its reply in support of its motion to strike. Wells did not file a separate response to the motion to strike the counterclaim, which is important for reasons discussed later in the section regarding sanctions.
In its motion for Rule 11 sanctions associated with the motion to strike the counterclaim, Wells contends that when Big Dipper sent Wells a copy of the motion to strike prior to filing it, Wells notified Big Dipper that the motion to strike was not warranted under existing law and that it should reconsider filing it. Nevertheless, Big Dipper filed the motion to strike on June 26, 2006, and Wells now seeks Rule 11 sanctions.
A. Motion to Strike Counterclaim
As noted above, the bases upon which Big Dipper moves to strike the counterclaim changes midstream. Big Dipper's opening motion is quite brief and appears to assert a res judicata--claim preclusion theory. Specifically, Big Dipper asserts that Wells is "bound" by the decision of the PTO to extend Big Dipper's trademark registration. However, in its reply in support of the motion to strike, Big Dipper characterizes its argument as a failure to exhaust administrative remedies. Specifically, Big Dipper appears to take issue with the fact that Wells has filed a cancellation proceeding with the TTAB as well as a counterclaim seeking cancellation in the instant action. See Response to Motion for Sanctions and Reply in Support of Motion to Dismiss at 5 ("If this Court allows Wells Dairy to proceed with the identical claim in this proceeding and before the TTAB, there is a possibility of inconsistent results," and stating that given the district court has power concurrent with the TTAB, "if Big Dipper's trademark is canceled in one forum and not the other, what would that mean? Would the trademark be canceled?").
The court will address each of the articulated bases for dismissal.
Res Judicata As to Big Dipper's initial contention that Wells is "bound" by the decision of the PTO to extend Big Dipper's registration, Big Dipper has offered no support for this argument. Indeed, as noted above, Big Dipper essentially abandoned this claim in its reply brief. As stated by Wells (and not contradicted by Big Dipper), the proceeding before the PTO regarding the extension of Big Dipper's federal registration was ex parte and does not bind subsequent determinations by a court. See McCarthy, 5 McCarthy on Trademarks, § 32:95 at 32-157, 32-158, and cases cited therein ("[T]he courts do not recognize ex parte decisions of trademark Examiners in the Patent and Trademark Office (PTO)," though they are entitled to consideration and "[a]n ex parte determination of an Examiner does not even preclude subsequent challenge before the Trademark Board by an opposer or petitioner for cancellation."). Indeed, as noted by McCarthy, "[e]x parte determinations of the Patent and Trademark Office, even if appealed to the Federal Circuit, cannot, under the rules of collateral estoppel, preclude those not a party to such determinations from collaterally challenging the result in subsequent litigation." Id. at 32-159 (emphasis in original).
Accordingly, to the extent that Big Dipper attempts to rely on a res judicata theory, the ...