Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_05-cv-03241/USCOURTS-azd-3_05-cv-03241-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 15:1051 Trademark Infringement

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Medi-Temp LLC, 

Plaintiff/counter-defendant, 

vs.

CVS Pharmacy, Inc., 

Defendant/counter-claimant. 

Medi-Temp L.L.C.

Plaintiff/counter-defendant,

vs.

Thera-Med., Inc.

Defendant/counter-claimant.

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CV 05-3241-PCT-JAT (Lead)

CV 05-3242-PCT-JAT (Cons)

ORDER

Pending before the Court are the following motions filed by Medi-Temp, LLC, in

response to Thera-Med, Inc.'s and CVS Pharmacy, Inc.'s counterclaims: Motion to Dismiss

Tortious Business Interference Counterclaims: Count X (Thera-Med), Count IX (CVS) (Doc.

# 31); Motion to Dismiss Abuse of Process Counterclaim: Count XVIII (Thera-Med), Count

XIV (CVS) (Doc. #32); Motion to Dismiss United States Anti-Trust Counterclaims: Count

XVI (Thera-Med), Count XII (CVS) (Doc. # 33); Motion for More Definite Statement of

Unfair Competition Counterclaims: Count XVII (Thera-Med), Count XIII (CVS) (Doc. #

Case 3:05-cv-03241-JAT Document 69 Filed 07/21/06 Page 1 of 19
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Prior to starting Medi-Temp, Mr. Evans was President and an employee of Medical

Specialties of California Manufacturing, Inc. ("MSCM"), the predecessor company to TheraMed. 

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34); Motion to Dismiss, or in the Alternative, to Strike Defendant's Counterclaim for

Declaration of Exceptional Case: Count IV (Thera-Med and CVS) (Doc. # 35); Motion to

Dismiss Counterclaims for Declaratory Judgment of Patent Invalidity and Unenforceability:

Counts II & III (Thera-Med and CVS) & Motion to Strike Fifth Affirmative Defense of

Patent Invalidity and Unenforceability (Doc. # 36); Motion to Dismiss Misappropriation

Counterclaim: Count IX (Thera-Med) (Doc. # 37); Motion to Dismiss Fraud Counterclaim:

Count XI (Thera-Med), Count X (CVS) (Doc. # 38); Motion to Dismiss Negligent

Misrepresentation Counterclaims: Count XII (Thera-Med), Count XI (CVS) (Doc. #39);

Motion for More Definite Statement of Injurious Falsehood and Defamation Counterclaims:

Counts XIII-XIV (Thera-Med) (Doc. # 40); and Motion to Dismiss Breach of Fiduciary Duty

Counterclaim: Count XV (Thera-Med) (Doc. # 41). 

Also pending is Medi-Temp's Motion to Dismiss Rite-Aid Counterclaims: Count IV

(Declaration of Exceptional Case); Count IX (Tortious Business Interference); Count X

(Fraud); Count XI (Negligent Misrepresentation) and Count XIV (Abuse of Process) and

Motion for More Definite Statement of Rite Aid Counterclaim XIII (Unfair Competition)

(Doc. #65). 

I. Background

The founder and President of Medi-Temp, LLC ("Medi-Temp"), Randy Allen Evans,

developed hot/cold therapy products, which were introduced and sold by Medi-Temp in

1996.1

 On July 4, 2000, Mr. Evans received United States Patent No. 6,083,254 covering

said products and subsequently assigned the patent to Medi-Temp. In its amended complaint,

Medi-Temp alleges that Defendants CVS Pharmacy, Inc. ("CVS"), Rite-Aid Corporation

("Rite-Aid"), and Thera-Med, Inc. ("Thera-Med") knowingly and intentionally copied MediTemp's patented hot/cold therapy products and incorporated Medi-Temp's unique blue trade

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dress. Medi-Temp alleges that such actions constitute patent infringement under the patent

laws of the United States, 35 U.S.C. § 1, et seq., trade dress infringement under the Lanham

Act, 15 U.S.C. § 1051, et seq., and unfair competition under Arizona common law. In

response, Thera-Med, CVS, and Rite-Aid separately answered, asserting various defenses

and counterclaims against Medi-Temp. The asserted defenses and counterclaims are the

subject of Medi-Temp's twelve (12) motions pending before the Court.

II. Motion to Dismiss Tortious Business Interference Counterclaims

Medi-Temp's first motion seeks dismissal of Thera-Med's and CVS's tortious business

interference counterclaims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. A

court may not dismiss a claim under Rule 12(b)(6) “unless it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claims which would entitle him to relief.”

Barnett v. Centoni, 31 F.3d 813, 816 (9th Cir. 1994) (citing Buckley v. Los Angeles, 957 F.2d

652, 654 (9th Cir. 1992)). A motion to dismiss for failure to state a claim is disfavored and

rarely granted. Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 248-49 (9th Cir. 1997). “All that

is required are sufficient allegations to put defendants fairly on notice of the claims against

them.” McKeever v. Block, 932 F.2d 795, 798 (9th Cir. 1991). Further, the Court must

construe the facts alleged in the counterclaims in the light most favorable to Thera-Med and

CVS and the Court must accept all well-pleaded factual allegations as true. See Shwarz v.

United States, 234 F.3d 428, 435 (9th Cir. 2000). Nonetheless, Thera-Med and CVS must

still meet the pleading requirements of Rule 8 of the Federal Rules of Civil Procedure. Under

Rule 8, the counterclaims must contain, “a short and plain statement of the claim showing

that the pleader is entitled to relief.” Finally, the Court must assume that all general

allegations "embrace whatever specific facts might be necessary to support them." Peloza

v. Capistrano Unified School District, 37 F.3d 517, 521 (9th Cir. 1994). 

To establish a claim for tortious business interference, Thera-Med and CVS must

show "the existence of a valid contractual relationship or business expectancy; the interferor's

knowledge of the relationship or expectancy; intentional interference inducing or causing a

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CVS has adopted all of Thera-Med's responses to Medi-Temp's motions. The Court

notes its frustration with the manner in which Thera-Med and CVS have responded to MediTemp's motions. Instead of filing one response to each motion or a single consolidated

response to all motions, Thera-Med and CVS reorganized the substance of the eleven (11)

motions, combining them into a set of four (4) substantive responses. While Thera-Med and

CVS may have had reason to respond in such a manner, they are strongly discouraged from

repeating such a practice in the future before this Court. 

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breach or termination of the relationship or expectancy; and resultant damage to the party

whose relationship or expectancy has been disrupted." Miller v. Hehlen, 209 Ariz. 462, 471,

104 P.3d 193, 202 (App. 2005) (citation omitted). Further, the interference must be improper

before liability will be found. Id. In seeking dismissal of Thera-Med's and CVS's tortious

business interference counterclaims, Medi-Temp argues that there are no facts alleged that

support the third element of the claim, specifically that Medi-Temp caused an actual breach

or termination of the contractual relationship or business expectancy between Thera-Med and

CVS. The Court agrees. 

A review of Thera-Med's and CVS's allegations clearly indicates there has been no

actual breach or termination of the contractual relationship or business expectancy between

Thera-Med and CVS. In fact, Thera-Med and CVS allege that a valid contractual

relationship and business expectancy continues to exist between them and that Medi-Temp

only interfered with the relationship or expectancy "in order to induce" one of the parties to

breach the existing relationship or terminate the expectancy. Highlighting the continuing

relationship and expectancy is Thera-Med's and CVS's response to the motion to dismiss2

 in

which they state that Medi-Temp's interference is "jeopardizing the possibility of renewing

any present contracts" and "reducing any possibility of consummation of present business

expectancies." This clearly indicates that there has been no actual breach or termination of

the contractual relationship or business expectancy between Thera-Med and CVS, but only

the potential of a breach or termination. This is insufficient to state a claim for tortious

business interference. Thus, even construing the facts alleged in the light most favorable to

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Thera-Med and CVS and accepting all well-pleaded factual allegations as true, the

allegations are insufficient as a matter of law to state a claim. See SmileCare Dental Group

v. Delta Dental Plan of Calif., Inc., 88 F.3d 780, 783 (9th Cir. 1996) (Court may dismiss

claim as a matter of law for "(1) lack of a cognizable legal theory or (2) insufficient facts

under a cognizable legal claim."). Accordingly, Medi-Temp's Motion to Dismiss Tortious

Business Interference Counterclaims: Count X (Thera-Med), Count IX (CVS) (Doc. # 31)

will be granted.

III. Motion to Dismiss Abuse of Process Counterclaim

Medi-Temp's second motion seeks dismissal of Thera-Med's and CVS's abuse of

process counterclaims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. To

establish a claim for abuse of process, Thera-Med and CVS must prove "a willful act in the

use of judicial process . . . for an ulterior purpose not proper in the regular context of the

proceedings." Nienstedt v. Wetzel, 133 Ariz. 348, 353, 651 P.2d 876, 881 (App. 1982). In

other words, Thera-Med and CVS must show that Medi-Temp is using the legal process

against them "primarily to accomplish a purpose for which it is not designed." Morn v. City

of Phoenix, 152 Ariz. 164, 166, 730 P.2d 873, 875 (App. 1986) (quoting Restatement

(Second) of Torts § 682 (1977)). As the Morn court further explains:

[S]ome definite act or threat not authorized by the process, or

aimed at an objective not legitimate in the course of the process,

is required; and there is no liability where the defendant has

done nothing more than carry out the process to its authorized

conclusion, even though with bad intentions. The improper

purpose usually takes the form of coercion to obtain a collateral

advantage, not properly involved in the proceeding itself, such

as the surrender of property or the payment of money, by the use

of the process as a threat or a club. There is, in other words, a

form of extortion, and it is what is done in a course of

negotiation, rather than the issuance of any formal use of the

process itself, which constitutes the tort.

Id., 152 Ariz at 168, 730 P.2d 877 (quoting W. Page Keeton, et al., Prosser and Keeton on

the Law of Torts § 121, at 897-99 (5th Ed. 1984). In seeking dismissal of the abuse of process

counterclaims, Medi-Temp argues, in part, that its alleged ulterior motive (to disrupt TheraCase 3:05-cv-03241-JAT Document 69 Filed 07/21/06 Page 5 of 19
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Med's and CVS's commercial relationships with their respective retailers and vendors) is

"squarely related to the claims set forth in Medi-Temp's Complaint - namely, Medi-Temp's

request for a Court order preventing the Defendants' continued infringement of Medi-Temp's

patent." The Court agrees. 

In their counterclaims, Thera-Med and CVS allege that Medi-Temp has willfully used

the judicial process and filed this lawsuit in order to disrupt commercial relationships

between Thera-Med and its retailers and CVS and its vendors. Thera-Med and CVS also

claim, in their response, that Medi-Temp "has been communicating publicly on the lawsuit

and publicizing its claims that its patent and trade dress rights have been infringed" and that

even "[t]he attorneys for the Plaintiff have . . . facilitated the Plaintiff's ability to make false

claims of patent and trade dress ownership through the press release from the law offices of

Snell & Wilmer." These allegations indicate that Medi-Temp's actions are aimed at a

legitimate objective in the course of the litigation process, which objective is to prevent

Thera-Med and CVS from continuing to infringe Medi-Temp's patent. Thera-Med and CVS

have failed to set forth any allegations tending to show that Medi-Temp engaged in any

coercive or extortionist behavior to obtain "a collateral advantage, not properly involved in

the proceeding itself, . . . by the use of the process as a threat or a club." Morn, 152 Ariz. at

168, 730 P.2d at 877. Thus, even construing the facts alleged in the light most favorable to

Thera-Med and CVS and accepting all well-pleaded factual allegations as true, the

allegations are insufficient as a matter of law to state a claim for abuse of process. See

SmileCare Dental Group, 88 F.3d 780 at 783. Accordingly, Medi-Temp's Motion to Dismiss

Abuse of Process Counterclaim: Count XVIII (Thera-Med), Count XIV (CVS) (Doc. #32)

will be granted. 

IV. Motion to Dismiss United States Anti-Trust Counterclaims

Medi-Temp's third motion seeks dismissal of Thera-Med's and CVS's anti-trust

counterclaims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. To establish a

violation of anti-trust law, Medi-Temp alleges that Thera-Med and CVS must establish that

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its patent was procured by "knowing and willful fraud" and that all of the elements necessary

to establish a violation of Section 2 of the Sherman Act are present. See Walker Process

Equip., Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965). As further

explained in C.R. Bard, Inc. v. M3 Systems, Inc., 157 F.3d 1340, 1367 (Fed. Cir. 1998), the

Walker Court "established that antitrust liability under section 2 of the Sherman Act may

arise when a patent has been procured by knowing and willful fraud, the patentee has market

power in the relevant market, and has used its fraudulently obtained patent to restrain

competition." In addition, under Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, 993 (9th

Cir. 1979), "infringement actions initiated in bad faith . . . may constitute an attempt to

monopolize violative of Section 2 of the antitrust law" if the other requisites of Section 2 are

established. 

In seeking dismissal of the anti-trust counterclaims, Medi-Temp argues Thera-Med

and CVS have failed to set forth sufficient allegations of fraud in the procurement of the

patent. Medi-Temp also argues Thera-Med and CVS have failed to set forth sufficient

allegations concerning an actionable violation of Section 2 of the Sherman Act because it is

not presumed that the patent-based right to exclude necessarily establishes market power in

anti-trust terms. 

In their counterclaims, Thera-Med and CVS allege the patent application at issue

omitted or misrepresented material information concerning the hot/cold therapy products,

specifically the incorporation of proprietary information the inventor obtained while an

employee of the predecessor company to Thera-Med. Further, Thera-Med and CVS allege,

contrary to Med-Temp's narrow interpretation of their argument, that Medi-Temp violated

Section 2 of the Sherman Act in its attempts to extend its patent rights beyond the reasonable

scope of those rights by, inter alia, attempting to enforce exclusive ownership of the color

"blue and black" in the relevant market. Finally, Thera-Med and CVS allege Medi-Temp has

illegally attempted to enforce its patent rights with full knowledge that the rights were

procured improperly from the Patent and Trademark Office. Considering all that is required

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are sufficient allegations to put Medi-Temp fairly on notice of the claims against it, the Court

finds that the allegations state a claim for a violation of anti-trust law. Accordingly, MediTemp's Motion to Dismiss United States Anti-Trust Counterclaims: Count XVI (Thera-Med),

Count XII (CVS) (Doc. # 33) will be denied.

V. Motion for More Definite Statement of Unfair Competition Counterclaims

Medi-Temp's fourth motion seeks a more definite statement of Thera-Med's and CVS's

unfair competition counterclaims. Under Rule 12(e) of the Federal Rules of Civil Procedure,

a party may move for a more definite statement if a pleading is "so vague or ambiguous that

a party cannot reasonably be required to frame a responsive pleading." A motion under Rule

12(e) is designed to attack unintelligibility rather than a lack of detail. Resolution Trust

Corp. v. Dean, 854 F.Supp. 626, 649 (D.Ariz. 1994) (citing Woods v. Reno Commodities,

Inc., 600 F.Supp. 574, 580 (D.Nev. 1984)). Such motions are not favored because "the

pleadings in the federal courts are only required to fairly notify the opposing party of the

nature of the claim." Id. (quoting A.G. Edwards & Sons, Inc. v. Smith, 736 F.Supp. 1030,

1032 (D.Ariz. 1989)).

An issue has been raised as to the application of California law versus Arizona law

to the unfair competition counterclaims. While the Court will not address that issue at this

time, it is clear that a variety of acts can constitute unfair competition under either Arizona

law or California law. See Brooks Fiber Communications of Tucson, Inc. v. GST, 992

F.Supp. 1124, 1131 (D.Ariz. 1997) (acknowledging the broad definition of "unfair

competition" under the Restatement (Third) of Unfair Competition § 1 (1995)); Self Directed

Placement Corp. v. Control Data Corp., 908 F.2d 462, 467 (9th Cir. 1990). For example,

under Arizona law, unfair competition includes acts of deceptive marketing, trademark

infringement, trade dress infringement, the misappropriation of intangible trade value

including trade secrets, and acts or practices actionable under federal or state statutes. See

Restatement (Third) of Unfair Competition § 1 (1995); see also Brooks Fiber, 992 F.Supp.

at 1131 (citing Restatement and stating "[w]here there is no pertinent Arizona law, Arizona

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courts will follow the Restatement of the Law whenever applicable"). Further, under

California law, unfair competition includes breach of a confidential relationship and

misappropriation. Self Directed Placement Corp., 908 F.2d at 467. 

In seeking a more definite statement of the unfair competition counterclaims, MediTemp argues that the counterclaims do not specify any actions or statements which amount

to unfair competition, or when those actions or statements may have occurred. In their

counterclaims, Thera-Med and CVS allege a multitude of actions that they contend, by

reference, constitute evidence of unfair competition. Specifically, there are numerous

allegations pertaining to a violation of anti-trust laws, misappropriation, and breach of

fiduciary duty, all of which can constitute unfair competition. Therefore, the Court finds that

the unfair competition counterclaim is sufficiently pleaded. While the counterclaim may lack

the exacting detail that Medi-Temp may be seeking, such detail is not the proper purpose of

a Rule 12(e) motion. See Resolution Trust Corp., 854 F.Supp. at 649. Accordingly, MediTemp's Motion for More Definite Statement of Unfair Competition Counterclaims: Count

XVII (Thera-Med), Count XIII (CVS) (Doc. # 34) will be denied.

VI. Motion to Dismiss or, in the Alternative, to Strike Defendants' Counterclaim for

Declaration of Exceptional Case 

Medi-Temp's fifth motion seeks dismissal of Thera-Med's and CVS's counterclaim for

declaration of exceptional case under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

In the alternative, Medi-Temp requests that the Court strike the counterclaim. Under 35

U.S.C. § 285, "[t]he court in exceptional cases may award reasonable attorney fees to the

prevailing party." Thera-Med and CVS allege that the "case is exceptional under 35 U.S.C.

§ 285, and [they are] entitled to an award of [their] attorneys' fees, costs, and expenses related

to the adjudication of this case." 

In its motion, Medi-Temp argues 35 U.S.C. § 285 does not create a separate cause of

action, instead only providing a remedy for attorney fees in "exceptional cases." In response,

Thera-Med and CVS argue they are entitled to a declaratory judgment that this is an

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exceptional case and thus entitled to attorney fees. The Court agrees with Medi-Temp's

argument and finds that 35 U.S.C. § 285 does not create a separate cause of action.

However, the Court will nonetheless deny the motion to dismiss or, in the alternative, to

strike and will instead construe the declaration of exceptional case counterclaim as a request

for attorney fees under 35 U.S.C. § 285. Accordingly, Medi-Temp's Motion to Dismiss, or

in the Alternative, to Strike Defendant's Counterclaim for Declaration of Exceptional Case:

Count IV (Thera-Med and CVS) (Doc. # 35) will be denied.

VII. Motion to Dismiss Counterclaims for Declaratory Judgment of Patent Invalidity

and Unenforceability and Motion to Strike Fifth Affirmative Defense of Patent

Invalidity and Unenforceability

Medi-Temp's sixth motion seeks dismissal of Thera-Med's and CVS's counterclaims

for declaratory judgment of patent invalidity and unenforceability under Rule 12(b)(6) of the

Federal Rules of Civil Procedure. Alternatively, Medi-Temp moves for a more definite

statement pursuant to Rule 12(e) of the Federal Rules of Civil Procedure. Further, MediTemp's seeks to strike Thera-Med's and CVS's fifth affirmative defense of patent invalidity

and unenforceability. 

In support of its motion to dismiss, Medi-Temp argues that the counterclaims fail to

provide fair notice as to the nature of the claims and the grounds upon which they rest. In

response, Thera-Med and CVS claim that their allegations pertaining to "numerous other

invalidating prior art products and references, none of which were identified by [the] inventor

to the United States Patent & Trademark Office" support an invalidity claim under 35 U.S.C.

§§ 102 and 103. Further, Thera-Med and CVS claim that their allegations pertaining to the

inventor's incorporation into the patent of proprietary information obtained while an

employee of the predecessor company to Thera-Med support an "invalidity claim under 35

U.S.C. § 102(f)" and "unenforceability for failure to comply with the duty of candor and

good faith dealing with the U.S. Patent Office." While Thera-Med and CVS do not set forth

in their counterclaims the exact provisions of Title 35 of the United States Code alleged to

be violated, the Court notes that Rule 8 of the Federal Rules of Civil Procedure only requires

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“a short and plain statement of the claim showing that the pleader is entitled to relief.” Under

this standard, Thera-Med and CVS have sufficiently stated their claims. Further, the Court

will construe Thera-Med's and CVS's responses indicating the specific Title 35 provisions

allegedly violated as a more definite statement of the nature of the counterclaims and the

grounds upon which they rest. 

Medi-Temp also argues that Thera-Med's and CVS's fifth affirmative defense should

be stricken because the pleadings fail to notify Medi-Temp of the nature of the defense. Rule

12(f) of the Federal Rule of Civil Procedure provides: “... the court may order stricken from

any pleading any insufficient defense or any redundant, immaterial, impertinent, or

scandalous matter.” With respect to striking an “insufficient defense,” the court should do

so when: 1) it appears to a certainty that the plaintiff will succeed regardless of what facts

the defendant could prove in support of the defense; 2) the affirmative defense involves no

disputed and substantial questions of law that could be resolved in such a way that they

would support the defense; and 3) plaintiff would be prejudiced by the inclusion of the

defense. Tompkins v. R.J. Reynolds Tobacco Co., 92 F.Supp.2d 70, 80 (N.D.N.Y. 2000).

As a policy matter, when a defense is insufficient as a matter of law, it should be stricken to

eliminate the delay and unnecessary expense of litigating an invalid claim. Estee Lauder, Inc

v. Fragrance Counter, 189 F.R.D. 269, 272 (S.D.N.Y. 1999) (finding that delay and expense

of litigation could be prejudice). However, granting a motion to strike is a “drastic remedy;”

therefore, it is rarely done. International Longshoreman’s Assoc. v. Virginia Int’l Terminals,

Inc., 904 F.Supp. 500, 504 (E.D. Va. 1995). 

Thera-Med's fifth affirmative defense states that the patent "is invalid and

unenforceable in its entirety and/or in relevant part for failure to meet the requirements of

patentability set forth in Title 35 of the United States Code, including 35 U.S.C. §§ 102 and

103." CVS's fifth affirmative defense states that the patent "is invalid and unenforceable in

its entirety and/or in relevant part for failure to meet the requirements of patentability set

forth in Title 35 of the United States Code, including 35 U.S.C. §§ 102, 112, and 103." In

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response to the motion to strike, Thera-Med and CVS further provide that the specific bases

for the defense include 35 U.S.C. § 102(a), 35 U.S.C. § 102(b), and 35 U.S.C. § 103(a). The

Court finds that the pleadings sufficiently notify Medi-Temp of the nature of the fifth

affirmative defense and that there has been no showing that the fifth affirmative defense will

not succeed regardless of the facts. 

Accordingly, Medi-Temp's Motion to Dismiss Counterclaims for Declaratory

Judgment of Patent Invalidity and Unenforceability: Counts II & III (Thera-Med and CVS)

& Motion to Strike Fifth Affirmative Defense of Patent Invalidity and Unenforceability (Doc.

# 36) will be denied.

VIII. Motion to Dismiss Misappropriation Counterclaim

Medi-Temp's seventh motion to dismiss seeks dismissal of Thera-Med's

misappropriation counterclaim pursuant to Rule 12(b)(6) of the Federal Rules of Civil

Procedure. Medi-Temp argues that Arizona law provides a two-year statute of limitations

for the misappropriation counterclaim and, as such, the counterclaim is time-barred. In

response, Thera-Med argues that California law (providing a three-year statute of limitations)

applies and that the accrual date of the counterclaim is a question of fact mandating denial

of the motion to dismiss. 

Regardless of the applicable law, a cause of action accrues when the party knows or

should have known through the exercise of reasonable diligence the facts underlying the

cause. Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of America, 182 Ariz. 586, 588,

898 P.2d 964, 966 (1995); Richards v. CH2M Hill, Inc., 26 Cal. 4th 798, 813, 29 P.3d 175,

184 (Cal. 2001). As pointed out by Thera-Med, if the accrual date depends on "who knew

what, when it became known, and what triggered such knowledge," then the motion to

dismiss should be denied because "rendering a decision as to the accrual date . . . would

require a factual determination." Smith ex rel. Estates of Boston Chicken, Inc. v. Arthur

Andersen L.L.P., 175 F.Supp.2d 1180, 1198 (D.Ariz. 2001). While Medi-Temp argues that

the pleadings clearly indicate the misappropriation counterclaim is time-barred, the Court

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finds that such a determination will require a factual determination. Accordingly, MediTemp's Motion to Dismiss Misappropriation Counterclaim: Count IX (Thera-Med) (Doc. #

37) will be denied.

IX. Motion to Dismiss Fraud Counterclaim

Medi-Temp's eighth motion to dismiss seeks dismissal of Thera-Med's and CVS's

fraud counterclaims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The

fraud counterclaims involve Medi-Temp's "false representations that it owned unique and

protectible intellectual property rights covered by the '254 Patent and/or blue trade dress on

the exterior of thermal therapy packs." Medi-Temp argues that Thera-Med and CVS have

failed to allege that they believed the alleged false statements were true or that they relied to

their detriment on the alleged false statements; therefore, Medi-Temp concludes, as a matter

of law, the fraud counterclaims must be dismissed. See Schmidt v. Mel Clayton Ford, 124

Ariz. 65, 67, 601 P.2d 1349, 1351 (App. 1979) (setting forth the nine elements of actionable

fraud, including "the hearer's ignorance of [the representation's] falsity," "his reliance on its

truth," and "his consequent and proximate injury."). 

In response, Thera-Med and CVS, relying on Smith ex rel. Estates of Boston Chicken,

Inc. v. Arthur Andersen L.L.P., 175 F.Supp.2d 1180, 1201 (D.Ariz. 2001), argue that they

sufficiently pleaded the fraud counterclaims by setting forth "the major misrepresentations

upon which they fraud claims are based" and that they are "not required to explain the legal

theory of the fraud claim." They also argue, relying on Gilligan v. Jamco Development

Corp., 108 F.3d 246, 249 (9th Cir. 1997), that they "are not required to allege each element

of a prima facie case at the pleading phase." The Court disagrees. 

While all that is required are sufficient allegations to put Medi-Temp fairly on notice

of the fraud claim against it, Rule 8 of the Federal Rules of Civil Procedure still requires that

Thera-Med's and CVS's allegations show that they are entitled to the relief sought. As MediTemp correctly argues, Thera-Med and CVS have failed to set forth any allegations sufficient

to support a finding that they believed that the alleged false statements were true or that they

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While Thera-Med and CVS argue in the response that CVS relied on the alleged false

statements when it sent a letter to Thera-Med requesting a response to the statements, even

were the Court to consider such evidence outside of the pleadings, there is no allegation that

CVS was damaged in any way by its claimed reliance.

4

The Court notes that the fraud counterclaims appear to address alleged false

statements made to and relied upon by third parties, not Thera-Med or CVS. For example,

Thera-Med and CVS allege that "[a]s a result of Plaintiff's false representations and the

detrimental reliance on those representations by consumers, manufacturers, and vendors,

Thera-Med [and CVS] suffered damage to [their] business." Generally, a plaintiff "must

assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights

or interests of third parties." Warth v. Seldin, 422 U.S. 490, 500 (1975) (citations omitted).

 

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relied to their detriment on the alleged false statements.3

 In fact, Thera-Med's and CVS's

pleadings evidence that they did not believe the alleged false statements and that they did not

rely thereon or suffer any damage as a result thereof.4

 Thus, even construing the facts alleged

in the light most favorable to Thera-Med and CVS and accepting all well-pleaded factual

allegations as true, Thera-Med and CVS have failed to show that they are entitled to relief

under the fraud counterclaims. See SmileCare Dental Group, 88 F.3d at 783. Accordingly,

Medi-Temp's Motion to Dismiss Fraud Counterclaim: Count XI (Thera-Med), Count X

(CVS) (Doc. # 38) will be granted.

X. Motion to Dismiss Negligent Misrepresentation Counterclaims

Medi-Temp's ninth motion to dismiss seeks dismissal of Thera-Med's and CVS's

negligent misrepresentation counterclaims pursuant to Rule 12(b)(6) of the Federal Rules of

Civil Procedure. A negligent misrepresentation claim, like a fraud claim, involves justifiable

reliance on the misrepresentation and damage caused thereby. See Keuhn v. Stanley, 208

Ariz. 124, 128, 91 P.3d 346, 350 (App. 2004). Medi-Temp argues that Thera-Med and CVS

have failed to allege that they justifiably relied on the alleged negligent misrepresentations;

therefore, Medi-Temp concludes, as a matter of law, the negligent misrepresentation

counterclaims must be dismissed. 

The negligent misrepresentation counterclaims involve Medi-Temp providing

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As with the fraud counterclaims, the Court notes that the negligent misrepresentation

counterclaims appear to address alleged negligent misrepresentations made to and relied

upon by third parties, not Thera-Med or CVS. For example, Thera-Med and CVS allege that

"[a]s a result of Plaintiff's negligent misrepresentations and the detrimental reliance upon the

false or incorrect information provided to consumers, manufacturers, and vendors of hot/cold

therapy products, Thera-Med [and CVS] suffered damage to [their] business."

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"consumers, manufacturers, and vendors with false or incorrect information regarding its

ownership of unique and protectible intellectual property rights covered by the '254 Patent

and/or blue trade dress on the exterior of thermal therapy packs." Thera-Med and CVS also

allege that the "consumers, manufacturers, and vendors" justifiably relied on the

representations, thereby causing damage to Thera-Med and CVS.5

 As with the fraud

counterclaims, Thera-Med's and CVS's pleadings evidence that they did not believe the

alleged negligent misrepresentations and that they did not rely thereon or suffer any damage

as a result thereof. Further, if Thera-Med and CVS did not believe the alleged negligent

misrepresentations to be true statements, then any reliance thereon could not be justifiable.

See W. Page Keeton, et al., Prosser and Keeton on the Law of Torts § 121, at 750 (5th Ed.

1984) ("[t]he plaintiff's conduct must not be so utterly unreasonable, in the light of the

information apparent to him, that the law may properly say that his loss is his own

responsibility."). Thus, even construing the facts alleged in the light most favorable to

Thera-Med and CVS and accepting all well-pleaded factual allegations as true, Thera-Med

and CVS have failed to show that they are entitled to relief under the negligent

misrepresentation counterclaims. See SmileCare Dental Group, 88 F.3d at 783.

Accordingly, Medi-Temp's Motion to Dismiss Negligent Misrepresentation Counterclaims:

Count XII (Thera-Med), Count XI (CVS) (Doc. #39) will be granted.

XI. Motion for More Definite Statement of Injurious Falsehood and Defamation

Counterclaims 

Medi-Temp's tenth motion seeks a more definite statement of Thera-Med's injurious

falsehood and defamation counterclaims pursuant to Rule 12(e) of the Federal Rules of Civil

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Thera-Med specifically identifies three communications it contends evidence MediTemp's false and defamatory statements of patent infringement. 

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Procedure. As discussed in Section V, a motion under Rule 12(e) is designed to attack

unintelligibility rather than a lack of detail. Resolution Trust Corp. v. Dean, 854 F.Supp.

626, 649 (D.Ariz. 1994) (citing Woods v. Reno Commodities, Inc., 600 F.Supp. 574, 580

(D.Nev. 1984)). Such motions are not favored because "the pleadings in the federal courts

are only required to fairly notify the opposing party of the nature of the claim." Id. (quoting

A.G. Edwards & Sons, Inc. v. Smith, 736 F.Supp. 1030, 1032 (D.Ariz. 1989)).

In seeking a more definite statement of the injurious falsehood and defamation

counterclaims, Medi-Temp argues that Thera-Med failed to articulate the specific statements

on which it bases its counterclaims. Medi-Temp further argues that claims posing a danger

of interfering with a party's First Amendment rights must be pleaded with specificity. While

the counterclaims may lack the detail Medi-Temp desires, the Court finds that the

counterclaims, in conjunction with Thera-Med's response to the motion,6

 supply sufficient

specificity of the injurious falsehood and defamation counterclaims to satisfy the pleading

requirements under the Federal Rules of Civil Procedure. In this regard, the Court will

construe Thera-Med's response to be a more definite statement of the nature of the

counterclaims and the grounds upon which they rest. Accordingly, Medi-Temp's Motion for

More Definite Statement of Injurious Falsehood and Defamation Counterclaims: Counts

XIII-XIV (Thera-Med) (Doc. # 40) will be denied.

XII. Motion to Dismiss Breach of Fiduciary Duty Counterclaim 

Medi-Temp's eleventh motion seeks dismissal of Thera-Med's breach of fiduciary duty

counterclaim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Medi-Temp

argues that Arizona law provides a two-year statute of limitations for the breach of fiduciary

duty counterclaim and, as such, the counterclaim is time-barred. In response, Thera-Med

argues that California law (providing a four-year statute of limitations) applies and that the

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accrual date of the counterclaim is a question of fact mandating denial of the motion to

dismiss. 

Regardless of the applicable law, a cause of action accrues when the party knows or

should have known through the exercise of reasonable diligence the facts underlying the

cause. Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of America, 182 Ariz. 586, 588,

898 P.2d 964, 966 (1995); Richards v. CH2M Hill, Inc., 26 Cal. 4th 798, 813, 29 P.3d 175,

184 (Cal. 2001). As pointed out by Thera-Med, if the accrual date depends on "who knew

what, when it became known, and what triggered such knowledge," then the motion to

dismiss should be denied because "rendering a decision as to the accrual date . . . would

require a factual determination." Smith ex rel. Estates of Boston Chicken, Inc. v. Arthur

Andersen L.L.P., 175 F.Supp.2d 1180, 1198 (D.Ariz. 2001). While Medi-Temp argues that

the pleadings clearly indicate the breach of fiduciary counterclaim is time-barred, the Court

finds that such a determination will require a factual determination. Accordingly, MediTemp's Motion to Dismiss Breach of Fiduciary Duty Counterclaim: Count XV (Thera-Med)

(Doc. # 41) will be denied.

XIII. Motion to Dismiss Rite-Aid's Counterclaims and Motion for More Definite

Statement

Medi-Temp filed a motion to dismiss Rite-Aid's counterclaims for declaration of

exceptional case, tortious business interference, fraud, negligent misrepresentation, and abuse

of process pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Because RiteAid's counterclaims are substantively identical to Thera-Med's and CVS's counterclaims, the

Court, for the reasons stated above, will grant Medi-Temp's motion to dismiss insofar as it

seeks dismissal of Rite-Aid's tortious business interference counterclaim, fraud counterclaim,

negligent misrepresentation counterclaim, and abuse of process counterclaim. Similarly, the

Court, for the reasons stated above, will deny Rite-Aid's motion to dismiss insofar as it seeks

dismissal of the declaration of exceptional case counterclaim. 

Medi-Temp's motion also seeks a more definite statement of Rite-Aid's unfair

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competition counterclaim. Because Rite-Aid's unfair competition counterclaim is

substantively identical to Thera-Med's and CVS's counterclaim, the Court, for the reasons

stated above, will deny Medi-Temp's motion for more definite statement of Rite-Aid's unfair

competition counterclaim. 

Accordingly, 

IT IS ORDERED that Medi-Temp's Motion to Dismiss Tortious Business

Interference Counterclaims: Count X (Thera-Med), Count IX (CVS) (Doc. # 31) is

GRANTED;

IT IS FURTHER ORDERED that Medi-Temp's Motion to Dismiss Abuse of

Process Counterclaim: Count XVIII (Thera-Med), Count XIV (CVS) (Doc. #32) is

GRANTED;

IT IS FURTHER ORDERED that Medi-Temp's Motion to Dismiss United States

Anti-Trust Counterclaims: Count XVI (Thera-Med), Count XII (CVS) (Doc. # 33) is

DENIED;

IT IS FURTHER ORDERED that Medi-Temp's Motion for More Definite

Statement of Unfair Competition Counterclaims: Count XVII (Thera-Med), Count XIII

(CVS) (Doc. # 34) is DENIED;

IT IS FURTHER ORDERED that Medi-Temp's Motion to Dismiss, or in the

Alternative, to Strike Defendant's Counterclaim for Declaration of Exceptional Case: Count

IV (Thera-Med and CVS) (Doc. # 35) is DENIED;

IT IS FURTHER ORDERED that Medi-Temp's Motion to Dismiss Counterclaims

for Declaratory Judgment of Patent Invalidity and Unenforceability: Counts II & III (TheraMed and CVS) & Motion to Strike Fifth Affirmative Defense of Patent Invalidity and

Unenforceability (Doc. # 36) is DENIED;

IT IS FURTHER ORDERED that Medi-Temp's Motion to Dismiss

Misappropriation Counterclaim: Count IX (Thera-Med) (Doc. # 37) is DENIED;

IT IS FURTHER ORDERED that Medi-Temp's Motion to Dismiss Fraud

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Counterclaim: Count XI (Thera-Med), Count X (CVS) (Doc. # 38) is GRANTED;

IT IS FURTHER ORDERED that Medi-Temp's Motion to Dismiss Negligent

Misrepresentation Counterclaims: Count XII (Thera-Med), Count XI (CVS) (Doc. #39) is

GRANTED;

IT IS FURTHER ORDERED that Medi-Temp's Motion for More Definite

Statement of Injurious Falsehood and Defamation Counterclaims: Counts XIII-XIV (TheraMed) (Doc. # 40) is DENIED;

IT IS FURTHER ORDERED that Medi-Temp's Motion to Dismiss Breach of

Fiduciary Duty Counterclaim: Count XV (Thera-Med) (Doc. # 41) is DENIED;

IT IS FURTHER ORDERED that Medi-Temp's Motion to Dismiss Rite-Aid

Counterclaims: Count IV (Declaration of Exceptional Case); Count IX (Tortious Business

Interference); Count X (Fraud); Count XI (Negligent Misrepresentation) and Count XIV

(Abuse of Process) and Motion for More Definite Statement of Rite Aid Counterclaim XIII

(Unfair Competition) (Doc. #65) is GRANTED in part and DENIED in part, specifically

GRANTED as to Count IX (Tortious Business Interference), Count X (Fraud), Count XI

(Negligent Misrepresentation) and Count XIV (Abuse of Process) and DENIED as to Count

IV (Declaration of Exceptional Case) and Counterclaim XIII (Unfair Competition);

IT IS FURTHER ORDERED that, to the extent Thera-Med, CVS and Rite-Aid

requested leave to amend in the event any of Medi-Temp's motions were granted, such relief

is DENIED without prejudice.

DATED this 20th day of July, 2006.

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