Download - Petsport et. al. v. Kong Company et. al.

8/12/2019 Petsport et. al. v. Kong Company et. al.

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COMPLAINT Case No. 3:14-cv-01045

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RICHARD E. LYON, JR. (SBN 46928)STACEY H. WANG (SBN 245195)HOLLAND & KNIGHT LLP400 South Hope Street, 8th FloorLos Angeles, California 90071Telephone 213.896.2400

Facsimile 213.896.2450E-mail: [email protected]. [email protected]

Attorneys for PlaintiffsPetsport USA, Inc. and The Kroger Co.

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO

PETSPORT USA, INC., a Californiacorporation and THE KROGER CO., an Ohiocorporation,

Plaintiffs,

vs.

THE KONG COMPANY, LLC, a ColoradoLimited Liability Company, and BOUNCE,INCORPORATED, a Colorado corporation,

Defendants.

)))))))))))))))))))))))))

))

Case No. 3:14-cv-01045

COMPLAINT FOR:

(1) DECLARATORY RELIEF OFPATENT INVALIDITY,UNENFORCEABILITY ANDNON-INFRINGEMENT

(2) FEDERAL UNFAIRCOMPETITION - LANHAM ACT,15 U.S.C. 1125

(3) UNFAIR COMPETITION - CAL.BUS. & PROF. CODE 17200ETSEQ.

(4) TORTIOUS INTERFERENCEWITH PROSPECTIVEECONOMIC ADVANTAGE

(5) INTENTIONALMISREPRESENTATION

(6) FRAUD

DEMAND FOR JURY TRIAL

Plaintiffs, Petsport USA, Inc. ("Petsport") and The Kroger Co. ("Kroger"), for their

Complaint against Defendants The Kong Company, LLC ("Kong") and Bounce, Incorporated

("Bounce"), allege as follows:


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THE PARTIES

1. Plaintiff, Petsport, is a corporation organized and existing under the laws of the Staof California, having its principal place of business at 1160 Railroad Avenue, Pittsburg, Californi

94565.

2. Plaintiff, Kroger, is a corporation organized and existing under the laws of the Staof Ohio, having its principal place of business at 1014 Vine Street, Cincinnati, Ohio 45202.

3. Upon information and belief, Defendant Kong is a Colorado Limited LiabilityCompany, having its principal place of business at 16191-D Table Mountain Parkway, Golden,

Colorado 80403.

4. Upon information and believe, Defendant Bounce is a Colorado corporation locateat 16191-D Table Mountain Parkway, Golden, Colorado 80403, and is and was at all relevant tim

doing business as The Kong Company.

JURISDICTION AND VENUE

5. The first cause of action is for a declaratory judgment of patent invalidity,unenforceability and non-infringement. Included in the relief sought is a determination that U.S.

Patent No. 5,947,061 (the " '061 patent," a copy of which is attached hereto as Exhibit A) is inva

unenforceable and not infringed by Petsport or Kroger. The first cause of action arises under the

Declaratory Judgment Act, 28 U.S.C. 2201-2202, and the Patent Laws of the United States, Ti

35 United States Code. Subject matter jurisdiction over the first cause of action is vested in this

Court by 28 U.S.C. 1331 and 1338(a).

6. The second cause of action is for federal unfair competition under Section 43(a) ofthe Lanham Act, 15 U.S.C. 1125(a). Subject matter jurisdiction over the second cause of action

vested in this court by 28 U.S.C. 1338(a) and 1338(b) and 15 U.S.C. 1121.

7. The third through sixth causes of action are for unfair competition, tortiousinterference with prospective business advantage, intentional misrepresentation and fraud,

respectively. Subject matter jurisdiction over the third through sixth causes of action is vested in

this court by 28 U.S.C. 1367 and 1338(b).


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8. Personal jurisdiction and venue are proper in this judicial district under 28 U.S.C. 1391 because, inter alia, the parties all do business in this district, a substantial part of the even

giving rise to this litigation occurred in this district and a substantial part of the property that is

subject to this litigation is situated in this district. Specifically, Defendant Bounce at all relevant

times sold Kong-branded products to pet products retailers in the State of California and did

business as The Kong Company. Defendant Kong currently sells Kong-branded products to pet

products retailers in the State of California and did and continues to do business in the State of

California.

INTRADISTRICT ASSIGNMENT

9. Under Local Rule 3.2(c), this is an Intellectual Property Action to be assigned on adistrict-wide basis.

GENERAL ALLEGATIONS

Defendant Kong sends a cease-and-desist letter to Plaintiff Kroger

10. On or about January 22, 2014, counsel for Kong sent a letter to Kroger, d/b/a PetPride (sic), stating that Kroger is making and/or selling a product labeled "Crazy Bounce Treat

Ball" (the "accused product") that may infringe various claims of the '061 patent that had been

assigned to Kong. A copy of the January 22, 2014 cease-and-desist letter is attached hereto as

Exhibit Band a photo of the accused product is shown in the attachment to the letter. Kong's

counsel demanded that Kroger refrain from manufacturing and selling the accused product and

informed Kroger that it was to sell off its remaining inventory of the accused product by "Februa

2014."

11. Plaintiff Petsport is a manufacturer of a wide variety of pet toys and other petproducts, including the accused product. The accused product is purchased by Kroger from

Petsport and resold by Kroger as the Pet Pride-branded "Crazy Bounce Treat Ball." Petsport sell

and sold the same pet toy, bearing Petsport's MOJO trademark, under its own brand to numerous

other retailers throughout the United States and has done so since 2007. A photo of Petsport's

MOJO-branded pet toy is attached hereto as Exhibit C.


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not have recesses of different depths or shapes. Plaintiffs are not infringing and are not threatenin

to infringe any valid, enforceable claims of the '061 patent, directly or indirectly.

Defendant Kong's "Kong" toy

16. Defendant Kong is a large manufacturer of pet toy products. Among the productsKong manufacturers is a three-lobed pet toy marketed under the trademark KONG which, on

information and belief, has been available in the market since 1976, wellbeforeKong's patent

application. Like the accused products, the Kong pet toy is generally hollow and has a small hole

its upper end and larger hole in its lower end. The Kong pet toy also does not have any other

recesses or openings therein. The Kong toy is the subject of U.S. Design Patent No. D256,958 th

was issued on September 16, 1980 to Joseph P. Markham, who also is one of the co-inventors

identified on the '061 patent. A copy of that Kong design patent is attached hereto as Exhibit D.

17. Because the Kong toy's configuration is so materially similar to the accused produinsofar as the subject matter of the '061 patent claims are concerned, any claim that would read on

the accused product would also read on the Defendants' Kong toy. If a claim in the '061 patent

reads on the Kong toy, then it is anticipated by the Kong toy and would be invalid.

The '061 Patent Application History

18. During the prosecution of the parent application, Application No. 08/663,447, nowabandoned, Bounce distinguished prior art cited by the PTO on the grounds that the cited prior ar

did not disclose providing edible food treats in combination with a pet toy. However, at the time

Bounce made these arguments to the PTO, Bounce had actually been disclosing to the public,for

over a year prior to the filing date of its application for the '061 patent, how to stuff the interior o

its Kong pet toy with edible food treats. At the same time Bounce argued to the PTO that the prio

art did not disclose pet treats in combination with pet toys, it also filed with the PTO a copy of its

"RECIPE FOR THE 'ALMOST PERFECT' DOG" publication, which describes and illustrates

various ways of stuffing the interior of the Kong pet toy product with edible food. Bounce also

acknowledged that this information had been disclosed to the public more than a year prior to the

filing date of its application. Bounce, however, did not disclose the configuration of its Kong pet

toy to the PTO or otherwise identify the configuration of that pet toy. Instead, Bounce told the P


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that the information disclosed in the "RECIPE" brochure is not believed to anticipate any claim in

its patent application. The "RECIPE" was apparently discussed in a subsequent interview betwee

the patent examiner and one of the co-inventors, although the details of the interview were not

disclosed. Several claims in the pending parent application were then allowed by the PTO.

19. After the allowance of the claims in the parent application, Bounce then filed a necontinuation-in-part application that eventually issued as the '061 patent, and abandoned the paren

application. The new application contained additional embodiments of the purported invention a

new claims that were quickly allowed. Had Bounce brought to the attention of the Patent Examin

the configuration of the Kong pet toy when it disclosed the "RECIPE FOR THE 'ALMOST

PERFECT' DOG" publication and not mischaracterized the "RECIPE," most if not all of the

pending claims in the '061 patent application could not have been properly allowed.

20. Therefore, on information and belief, at the time Bounce filed its application for th'061 patent, Bounce knew that the combination of a pet toy and an edible food treat provided in th

recesses of the toy was not novel and not patentable.

21. On information and belief, Bounce intentionally misrepresented to the PTO thesubstance of the "RECIPE" publication and intentionally withheld material details in the

configuration of the Kong pet toy referred to in that publication including, without limitation, the

fact that the Kong toy, when stuffed with one or more edible treats, read directly on claims that

Bounce was proposing to the PTO.

22. Bounce's misrepresentation of the "RECIPE" publication and its withholding of thKong configuration were material because the '061 patent would not have issued without the

misrepresentation and withholding of such information.

23.

Thus, throughout the prosecution of the '061 patent, Bounce failed to disclose to th

PTO the configuration of the Kong pet toy and, while submitting a publication to the PTO

describing how to stuff a Kong with edible pet treats, it did so in a way to conceal the significance

of that publication to the subject matter of its pending patent claims.

24. Indeed, to the extent that any of the issued claims in the '061 patent reads on theaccused product, those same claims would also read on Kong's Kong-branded pet toy. The Kong


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branded pet toy, like the "RECIPE" publication and information contained therein, is prior art to

'061 patent; therefore, the '061 patent would be invalid. Because Kong is the alter ego of Bounce

and because Joseph P. Markham, who was the President of Bounce during the entire prosecution

the parent application and the continuation-in-part application that issued as the '061 patent and w

one of the inventors of record of the '061 patent and was and is a principal of Kong, Kong is and

been since its inception well aware of the actions of Bounce set forth above.

FIRST CAUSE OF ACTION

Declaratory Relief Of Patent Invalidity Non-Infringement and Unenforceability

(Against Defendant Kong)

25. Petsport and Kroger reallege and incorporate the allegations of paragraphs 1 throu24 above as though fully set forth herein.

26. An actual controversy, within the meaning of 28 U.S.C. 2201 and 2202, existsbetween Plaintiffs and Kong with respect to the invalidity, non-infringement and enforceability o

the '061 patent.

27. Upon being advised by Kroger of Kong's allegation of infringement in Kong'sJanuary 22, 2014 letter discussed in paragraph 10 above, Petsport -- the supplier of the accused

product to Kroger -- instructed its counsel to contacted Kong's counsel in an effort to resolve the

matter. No resolution was reached.

28. Kong's actions have created a reasonable apprehension by Kroger and Petsport thaKong will initiate litigation against them for the alleged infringement of the '061 patent, if Petspo

continues to manufacture and sell the accused product, including Petsport's MOJO-branded pet to

and if Kroger continues to sell the accused product.

29.

The '061 patent is invalid on or more of the following grounds. The invention lack

novelty under 35 U.S.C. 102(a), (b), (d) and (f). The invention is obvious under 35 U.S.C.

103(a); and the inventor did not invent the subject matter of the '061 patent as recited under 35

U.S.C. 101, 102(f), 111 and 115.

30. Moreover, the '061 patent, and each of the claims thereof, is void and unenforceabbecause the patent was obtained through inequitable conduct practiced by Bounce, its alter ego


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Kong and/or their agents during the course of the prosecution of the '061 patent and/or prosecuti

of the parent application to the '061 patent. That conduct violated the duty of good faith and cand

toward the PTO. On information and belief, Bounce and/or its agents (1) knowingly made false

representations to the PTO and (2) knowingly withheld from the PTO material information, all w

the intent to mislead the PTO.

31. Plaintiffs are informed and believe, and on that basis aver, that Defendants contenthat the '061 patent is valid and enforceable and that Plaintiffs have purportedly infringed and are

infringing on Kong's '061 patent.

32. Accordingly, a valid and justiciable controversy has arisen and exists betweenPlaintiffs and Defendants. Plaintiffs desire a judicial determination and declaration of the parties

respective rights of the duties, and a declaration is necessary and appropriate at this time so that th

parties may ascertain their respective rights and duties.

SECOND CAUSE OF ACTION

Federal Unfair Competition


33. Petsport and Kroger reallege and incorporate the allegations of paragraphs 1 throu32 above as though fully set forth herein.

34. After the issuance of the '061 patent, Bounce attempted to assert the '061 patentagainst manufacturers and retailers of pet toys having a hole extending therethrough for stuffing t

toy with one or more edible pet treats as disclosed to the public by Bounce in its "RECIPE FOR

THE 'ALMOST PERFECT' DOG" publication.

35. On information and belief, Bounce asserted the '061 patent against those entities inbad faith for the purpose of diverting business to Bounce. When Bounce asserted the '061 patent

against those entities, Bounce knew that the '061 patent was not valid. Upon the formation of

Kong, Kong was well aware that the '061 patent was not valid, and that Bounce had asserted the

'061 patent against other entities with full knowledge of the patent's invalidity.


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44. As a proximate and direct result of Kong's conduct, Petsport and Kroger havesuffered harm entitling them to damages in an amount according to proof at trial.

45. Kong's unfair, unlawful and/or fraudulent acts are causing irreparable harm toPetsport and Kroger and will continue to cause irreparable harm unless enjoined by this Court.

46. Kong's actions were willful, wanton, malicious, oppressive, egregious, and inconscientious disregard of Petsport and Kroger's rights, thereby justifying an award of punitive an

exemplary damages.

FOURTH CAUSE OF ACTION

Tortious Interference with Prospective Economic Advantage


47. Petsport and Kroger reallege and incorporate the allegations of paragraphs 1 throu46 as though fully set forth herein.

48. Petsport had and has valid business expectations with its customers and potentialcustomers, including Kroger, in which Petsport had a reasonable probability of realizing financia

benefit.

49. Kroger also had and has valid business expectations with respect to its sale of theaccused product from which Kroger had a reasonable probability of realizing financial benefit.

50. On information and belief, Kong knew of and was aware of Kroger's businessexpectancies with those customers and potential customers, and was aware of Kroger's vendor's

(i.e., Petsport's) expectancies with respect to Kroger's sales of the accused product.

51. On information and belief, Kong threatened to bring a patent infringement actionagainst Kroger in bad faith and with the intention of interfering with both Petsport and Kroger's

business expectancies with respect to the accused product, so as to deprive and interfere with

Petsport and Kroger's financial benefit from those expectancies.

52. Kong's threatening communications with Kroger disrupted and interfered withPetsport and Kroger's business expectancies with respect to the accused product.


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53. On information and belief, there is a reasonable probability that, absent Kong'sactions, Petsport and Kroger would have received the anticipated economic benefit from its

business expectancies.

54. As a direct and proximate result of Kong's actions, Petsport and Kroger have eachsuffered harm entitling them to damages in an amount according to proof at trial.

55. Kong's acts of interference are causing irreparable harm to Petsport and Kroger anwill continue to cause irreparable harm unless enjoined by this Court.

56. Kong's conduct was willful, wanton, malicious, oppressive, egregious, and inconscious disregard of Petsport and Kroger's rights, justifying the imposition of punitive and

exemplary damages.

FIFTH CAUSE OF ACTION

Intentional Misrepresentation



58. Kong has contacted Petsport's customer, Kroger, and has asserted the '061 patentagainst Kroger despite knowing that the '061 patent is invalid and unenforceable. Kong made its

misrepresentations in a cease-and-desist letter to Kroger in which Kong represented that the '061

patent was enforceable and valid, when in fact the representation was false.

59. When Kong made the false representations to Kroger, Kong knew that therepresentations would be forwarded to Kroger's vendor, i.e., Petsport, which manufactures the

accused product.

60.

Kong intended that Kroger, and its supplier Petsport, would rely on the

representation upon receipt of the letter.

61. Kong knew that this representation was false when it made it. Alternatively, Kongmade the representation recklessly and without regard for its truth.


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62. Plaintiffs reasonably relied on the representation and were harmed by having toengage counsel to investigate Kong's claims. Petsport is further harmed because the false

representations made by Kong triggered Petsport's contractual indemnity obligations to Kroger.

63. Reliance on Kong's representation was a substantial factor in causing Plaintiffs'harm.

64. Kong's conduct was willful, wanton, malicious, oppressive, egregious, and inconscious disregard of Petsport and Kroger's rights, justifying the imposition of punitive and

exemplary damages.

SIXTH CAUSE OF ACTION

Fraud

(Against Defendants Kong and Bounce)


66. As described above, Bounce obtained the '061 patent by engaging in knowing andfraudulent acts. Specifically, Bounce intended to deceive the PTO and intended, by the deception

described above, to procure a patent to which it was not otherwise entitled. Bounce, and later Ko

upon its formation, knew about the highly material "RECIPE" publication and about the

configuration of its own KONG toy, which publicly disclosed how to stuff the interior with edibl

food treats, yet failed to properly disclose same to the PTO.

67. On information and belief, Bounce and Kong were each aware as it asserts allegedinfringement of the '061 patent against Kroger and Petsport, that the '061 patent was procured

through the fraudulent conduct described above by Bounce.

68.

Kong sent a cease-and-desist letter to Kroger in which Kong represented that the

'061 patent was valid, when in fact the representation was false. Kong and Bounce, each as the a

ego of the other, participated in the making of the false representations.

69. Kong and Bounce knew that the representation in the cease-and-desist letter wasfalse. Alternatively, Kong and Bounce were reckless and acted without regard for the truth of the

representations.


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70. Kong and Bounce intended that Kroger, and its supplier Petsport, would rely on threpresentation.

71. Plaintiffs reasonably relied on the representation and was harmed in that Plaintiffswere required to engage counsel to investigate Kong's claims. Petsport is further harmed because

the false representations made by Kong triggered Petsport's contractual indemnity obligations to

Kroger.

72. Reliance on Kong's representation was a substantial factor in causing Plaintiffs'harm.

73. Kong's conduct and Bounce's conduct were willful, wanton, malicious, oppressiveegregious, and in conscious disregard of Petsport and Kroger's rights, justifying the imposition of

punitive and exemplary damages.

PRAYER FOR RELIEF

WHEREFORE, Petsport and Kroger pray for relief as follows:

A. For a declaratory judgment that U.S. Patent No. 5,947,061 is invalid, unenforceab

and void in law and not infringed by any product or method made, used, or offered for sale by or

from Petsport or Kroger.

B. For a preliminary and permanent injunction prohibiting Kong, its officers, agents,

employees, representatives, counsel, and all other persons in active concert or participation with a

of them from:

(1) charging infringement of, or instituting any action for infringement of U.S

Patent No. 5,947,061 against Petsport or Kroger or against their customers or any distributor or u

of Petsport's Mojo-branded pet toy or Kroger's Crazy Bounce Treat Ball pet toy.

(2) unfairly competing with Petsport or Kroger; and

(3) tortiously interfering with Petsport or Kroger's business expectancies with

their customers and potential customers.

C. For an order finding that Kong violated Section 43(a) of the Lanham Act, 15 U.S.C

1125(a).


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D. For an order finding that Kong engaged in tortious interference with prospective

economic advantage.

E. For an order finding that Kong engaged in unfair competition.

F. For an order finding that Kong engaged in intentional misrepresentation.

G. For an order finding that Kong and Bounce engaged in fraud.

H. For an order awarding damages, in an amount to be fixed by the Court in accordan

with proof, including punitive and exemplary damages, as appropriate, as well as all of Kong's

profits or gains of any kind resulting from its acts of federal unfair competition, unfair competitio

tortious interference with prospective economic advantage, intentional misrepresentation, and fra

I. For an order awarding the costs of this action.

J. For an order finding that this case is an exceptional one under 35 U.S.C. 285 suc

that Plaintiffs are entitled to recover their attorney's fees.

K. For such other and further relief as the Court deems just and proper.

Dated: March 5, 2014 HOLLAND & KNIGHT LLP

By: /S/ Stacey H. WangRichard E. Lyon, Jr.Stacey H. Wang

Attorneys for Petsport USA, Inc. andThe Kroger Co.


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DEMAND FOR JURY TRIAL

Pursuant to Fed. R. Civ. P. 38(b) and Local Rule 3.4.10.1, Plaintiffs Petsport USA, Inc. an

The Kroger Co. hereby demand a jury trial of all issues triable by a jury.

Dated: March 5, 2014 HOLLAND & KNIGHT LLP

By: /S/ Stacey H. WangRichard E. Lyon, Jr.Stacey H. Wang

Attorneys for Petsport USA, Inc. andThe Kroger Co.