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Baig v. Coca-Cola Co.

May 27, 2009

MIRZA N. BAIG AND BLUE SPRINGS WATER CO., PLAINTIFF,
v.
THE COCA-COLA COMPANY, DEFENDANT.



The opinion of the court was delivered by: Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER

Plaintiffs, Mirza N. Baig ("Baig") and Blue Springs Water Company ("Blue Springs"), filed a three count first amended complaint against defendant, The Coca-Cola Company, alleging trademark infringement and false designation of origin in violation of the Lanham Act, 15 U.S.C. § 1125(a) (Count I) and trademark infringement under the Canadian Trademark Act (Count II). Plaintiffs also seek declaratory judgment for relief from a default judgment of the U.S. District Court for the Northern District of Georgia (Count III). Defendant has moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12. For the reasons discussed below, defendant's motion to dismiss is denied as to Count I and granted as to Counts II and III.

FACTS

For purposes of a motion to dismiss, the court accepts all well-pleaded allegations as true and draws all reasonable inferences in favor of the plaintiff. Travel Around the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1428 (7th Cir. 1996). Commencing in early 1998, plaintiffs manufactured, distributed, marketed, and sold a brand of Canadian bottled spring water under the name and mark "Naturally Zero," in the greater Chicagoland area, downstate Illinois, Southern Wisconsin, Northwestern Indiana, and on the internet. The following year, stories about "Naturally Zero" appeared in several beverage trade journals. Encouraged by this attention, plaintiffs hired a marketing consultant, and in December 2002 the consultant phoned Jeff Dunn ("Dunn"), the then-president of defendant's North American business unit in Atlanta, to pitch the potential sale of the "Naturally Zero" product line to defendant. Allegedly Dunn expressed interest in the proposal, and plaintiffs sent a follow-up letter describing the product line and marketing campaign. A month later, in February 2003, plaintiffs received a letter from one of defendant's vice presidents declining the offer.

On October 20, 2003, defendant filed an application with the United States Patent and Trademark Office ("USPTO") to register the trademark "Sprite Zero" on an intent-to-use basis. In September 2004, defendant began manufacturing, distributing, and selling "Sprite Zero." Baig first learned about "Sprite Zero" when he saw it advertised on a highway billboard. The following month, plaintiffs' representative called defendant's legal department in Atlanta to discuss defendant's alleged infringement of the "Naturally Zero" mark. Baig sent a follow-up letter to defendant on November 12, 2004. Defendant's legal department responded by letter in January 2005 denying any wrong-doing. Plaintiffs claim that they made further attempts to settle their claim with defendants, but their efforts are not described in the amended complaint.

In September 2005, plaintiffs filed a request with the USPTO for an extension of time to oppose defendant's application to register the mark "Nothing is lighter than zero." The USPTO granted a 90-day extension, but plaintiffs did not file an opposition. In November 2007, plaintiffs filed a similar extension request with the USPTO to oppose defendant's application to register "Sprite Zero." Once again, an extension was granted, but plaintiffs did not file an opposition. In March 2008, plaintiffs sent a formal demand letter to defendant detailing their claim and demanding a $100,000,000.00 settlement. In a follow-up letter dated June 5, 2008, counsel for plaintiffs advised defendant that unless an agreement was reached by June 13, 2008, Baig would file suit against defendant in this court.

On June 12, 2008, defendant filed its own complaint against plaintiffs in the U.S. District Court for the Northern District of Georgia in Atlanta (The Coca-Cola Company v. Baig, No. 1:08-cv-2010; the "Georgia Case"), seeking a declaratory judgment that defendant was not liable to plaintiffs for infringement, misappropriation, unfair competition or other violations of plaintiffs' rights, and that any right to the "Naturally Zero" mark that plaintiffs may have had based on past sales had been abandoned. Plaintiffs did not file an appearance in the Georgia Case.

On July 24, 2008, plaintiffs filed the instant suit with this court. The following day, defendant moved for a default judgment in the Georgia Case. The court in the Georgia Case, ruling that it had venue, subject matter jurisdiction, and personal jurisdiction over the defendants, granted a default judgment (on a form order drafted by defendant's counsel), holding that: (1) defendant had not misappropriated plaintiffs' intellectual property or breached any contractual relationship with plaintiffs; (2) any rights plaintiffs might have had to the names "Naturally Zero Canadian Spring Water" and/or "Naturally Zero" had been abandoned; (3) the use by defendant of its trademarks that include "Zero" do not infringe any valid trademark rights of plaintiffs; and (4) the development, adoption, and use by defendant of its trademarks that include "Zero" do not constitute unfair competition with plaintiffs, or otherwise violate any rights of plaintiffs. Moreover, the court granted a permanent injunction enjoining plaintiffs from asserting against defendant in any forum any claim that defendant has infringed, misappropriated, competed unfairly, or otherwise violated plaintiffs' rights by developing, adopting, or using defendant's trademarks that include "Zero." Subsequently, plaintiffs filed the instant First Amended Complaint on July 31, 2008.

DISCUSSION

Defendant has brought the instant motion to dismiss arguing that Counts I and II of the amended complaint are barred by res judicata arising from the judgment in favor of defendant and against plaintiffs entered by the court in the Georgia Case. Alternatively defendant argues that Count II should be dismissed for lack of subject matter jurisdiction. Finally, defendant argues that Count III fails because it is an improper attempt to void the default judgment entered in the Georgia Case.

Standard of Review

The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to rule on its merits. See Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In analyzing the motion, the court must accept the well-pleaded allegations as true, and view those allegations in the light most favorable to plaintiff. McMillan v. Collection Professionals, Inc., 455 F.3d 754, 758 (7th Cir. 2006). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, . . . a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of the cause of action will not do . . .." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-65, 167 L.Ed. 2d 929 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level." Id. at 1965.

Counts I and II of the Amended Complaint seek relief for trademark infringement under U.S. and Canadian law, respectively. Defendant has moved to dismiss, arguing that Counts I and II of the Amended Complaint are barred by res judicata. Under the doctrine of res judicata, or claim preclusion, "final judgment on the merits in a court of competent jurisdiction bars the same parties or their privies from relitigating not only the issues that were in fact raised and decided but also all other issues which could have been raised in the prior action." Lee v. Peoria, 685 F.2d 196, 199 (7th Cir. 1982). For federal res judicata to apply, the moving party must show:

(1) final judgment on the merits in an earlier action; (2) identity of claims in both suits; and (3) identity of parties or their privies. Ross ex rel. Ross v. Bd. of Educ. of Tp. High School Dist. 211, 486 F.3d 279, 282 (7th Cir. 2007). The parties do not dispute that the second and third prongs of these requirements are met. Plaintiffs argue that defendant fails to meet the first requirement of res judicata because the court in the Georgia Case ...


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