Free Response to Motion - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 04-cv-617-LTB-BNB POLYROCK TECHNOLOGIES, LLC, a Colorado limited liability company, Plaintiff, v. GENERAL STEEL DOMESTIC SALES, LLC, et al. Defendants. P A N IFS OPPOSITION TO L I TF ' MOTION TO DISMISS DEFENDANT DEMAREST -- ORAL ARGUMENT REQUESTED -Demarest makes a two-s pa u etnw i h fsr us d m s l f o R c' t r m n i h h e ite et i i a o P l oks e g c r q s s s y Lanham Act unfair competition claim on grounds of failure to state a claim and then seeks dismissal of all remaining claims against him as allegedly lacking federal jurisdiction. Neither of the steps is legally correct and the Court should reject each of them. C n a t D m r t a u etea i P l oks ahm A t lm t express ot r o e a ss r m n r r n oy c' L na c c i ,h ry e' g gdg R a e l gaeadh t yo t Lna A t ai s C nr s i etobod adesad a ug n io f h ahm c m n et oge ' n n t ral dr n n sr e f ss t y s prohibit acts ­including trade secret misappropriation ­traditionally included within common law unfair competition. Even if the Court were to adopt the more limited view of the Lanham A t ap ct n t tD m r tepue, o R c' c i saa s D m r tsfc n y c s plao h e a s soss P l oks lm gi t e a s uf i t ' i i a e y a n e ie l aeebt f s ds nt no oi nadf s avrs gt cm wt nt L na A t lg o a e ei ao f r i n a e de in o o e i i h ahm c s l h l g i g l ti h e ' prohibitions. Thus, PolyRock has stated a claim under federal law against Demarest, and the motion fails on this basis alone.

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D m r t a u eto d m s l i ot r ui o P l oks tea c i s l e a ss r m n fr i i awt u pe d e f oy c's tl lm a o e' g s s h j c R a w a s fails ­without regard to the disposition of his motion to dismiss the Lanham Act claim. P l okstea c i s gi t e a saee na cm et n n a s otfh sm o R c's tl lm aa sD m r tlg uf ro pti ad re uo t a e y a w a n e l i io i e f t a P l oksL na A t lm aa s D m r t n t o e df dn . I sc a s s oy c' ahm c c i s gi t e a s ad h t r e nat n uh c R a n e e h e s circumstances, 28 U.S.C. § 1338(b) confers original (non-discretionary) jurisdiction over the s t l c i saa s D m r t B tee i i d nt t C utsol ee i i te a lm gi t e a s a w a n e . u vn f t i ' h or hu xr s t d , e d ce s discretionary jurisdiction under 28 U.S.C. § 1367, if necessary, because permitting PolyRock to proceed on all of its state law claims in this Court will conserve the resources of the parties and the court. I. P L R C ' C A MS O Y O KS L I . P l oks lm udr et n4( o t L na A t1 USC § o R c' c i ne sco 3a fh ahm c 5 ... 1125(a), consists y a i ) e , of two principal components: (i) uf rcm et n bsd uo df dn '( cluding na o pti ae pn e nat i i io e s n

D m r t) otn g acs t P l oks por t y ad t d sc t i om t n e a ss b i n ces o oy c' rpia e' ai R e r n r e er n r ao a e f i ( rpiayIfr ao" udracni n at adnno pti ar m n adt n " or t nom t n) ne P er i of etly n ocm et n ge et n h d ii io e e m sprpii it m nf t e n sl"nc-of poutt t e ndants misrepresented i por t g to aua u ad e kok f rdc h df a an cr l " s a e as their own creation; and (ii) uf r o pti bsduo df dn ' s o avrs g na cm et n ae pn e nat ue f de in i io e s ti m t is eii P l oks rdc isl le t eo t io n nc-off products. a r ldp t g o R c'pout n a sir u frh r w kok ea cn y s e ta r e With respect to defendant Demarest, PolyRock alleges that he unlawfully provided and ep id o R c'Por t y nom t na pro df dn 'ce eom nf t e n xl t P l oks rpia Ifr ao s a f e nat shm t aua u ad oe y er i t e s cr sliit poue cp s f oy oks rf i s n bi i pouta t io n (A e lcl rdcd oi o P l c' a ic lt e u d g rdc sh r w . 2 l liy e R tia o ln s e Cplt. ¶¶ 25-26.) Through these manufacturing and sales activities, defendants, including

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Demarest, falsely designated the origin of their products and misrepresented the nature of their commercial activities. (2A Cplt. ¶ 33.) PolyRock alleges further violation of the Lanham Act t og G nr Sel ad h uh ee l t ' n r a es G nt e f s avrs g o t i a ic ls n bi i pout ui p t e ad es n' a e de in f h r rf i t e u d g rdc s g iu s n o s l ti e tia o ln s n cr dsr t n o P l oks rdc .(A C l ¶ 8 C n a t D m r t i e r ao, ec p os f o R c' pout 2 p . 2. ot r o e a ss n r e t n ii y s t ) ry e ' t p ti PolyRock does seek to hold him responsible for these activities. PolyRock contends that

Demarest, through misappropriation of the Proprietary Information to produce replicas of P l okspout eal G nr Selad G nt e t ueP l oksavrs g o R c' rdc , nb d ee l t n es n o s o R c' de in y s e a e o y ti materials to promote the knock-offs that they sell. Demarest is thus directly or contributorily liable for this conduct under the Lanham Act. P l oks tel uf r o pti c i sfr i ao o t C l aoU i r o R c' s t a na cm et n lm ,o v li fh o r y a w i io a o tn e o d n om f Trade Secrets Act, breach of contract, violation of the Colorado Consumer Protection Act, conspiracy to violate the Lanham Act and state law, and unjust enrichment, are based upon df dn ' a i acs tt Por t y nom t n nef s pe ne, i prpii e nat gi n cesoh rpia Ifr ao udra e r essm s por t g e s ng e er i l t a an it in order to manufacture and sell deceptively similar products, and misrepresenting the origin of ad cm e i at ie sr ud g t pout P l okss t l c i saa s n o m r a cv i ur ni h rdc . oy c' te a lm gi t c l i ts o n e s R a w a n Demarest thus arise out of the same factual allegations and circumstances as PolyRock alleges in support of its Lanham Act claim against Demarest and the other defendants. II. POLYROCK STATES A LANHAM ACT CLAIM AGAINST DEMAREST. D m r ts r t t o R c'L na A tlmf lts ta lmaa sh ad e a sas t h P l oks ahm cc i aso te c i gi ti n e es a y a i a a n m should be dismissed under Fed. R. Civ. P. 12(b)(6). However, dismissal is not available unless " apa t th p i i cnpoe ost fati spot fh c i t t ol etl i per h t ln f a rv n e o f sn upro t lm h w u n t t s a e a tf c e a a d ie

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h t r i . Dubbs v. Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir. 2003). In deciding the i o ee " m lf motion, the Court accepts the well-pleaded allegations of the complaint as true and construes them in the light most favorable to plaintiff. Id. A motion to dismiss for failure to state a claim i"i e wt d f o adir e gat . Peterson v. Jensen, 371 F.3d 1199, 1201 (10th s v w d i ia r n sa l r e " e h sv ry n d Cir. 2004). The Lanham Act prohibits acts of unfair competition far more broadly than Demarest ako l gsn im t n C nr s i eto rv e r ey o uf r o pti i t cnwe e i h o o. oge ' n n t poi a e d fr na cm et n n h d s i ss t d m i io e broadest sense of the term is readily discernible from the provisions of the Lanham Act as well as its legislative history.1 In section 45 of the Lanham Act, 15 U.S.C. § 1127, Congress specified t t [h i et fh cat i t r u t cm e ewt nt cn o o C nr s t h " ]e n n o t s hp rs o e le o m r i i h ot l f oge ... o a t t i e ga c h e r s protect persons engaged in such commerce against unfair competition. (Emphasis added.) " T el iav h t yo t L na A t ofm t t oges suh t c a ageneral h e s t e io fh ahm c cni s h C nr "ogto r t g li s r e r a s ee federal law of unfair competition to protect competing companies in the wake of the Supreme C ut dc i i Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), which was thought to have ors eio n ' sn em nt t eii bd o f e l na cm et nl . Procter & Gamble Co. v. l i e h x t g oy f e r uf r o pti a " i a d e sn da i io w Haugen, 222 F.3d 1262, 1272 (10th Cir. 2000) (emphasis added). Although Congress did not epes df e uf r o pti "n h A tt p i m ai o t t m ecm assh xr l e n "na cm et n i t c h ln en g fh e no ps t sy i i io e ,e a n e r e e common law scope of an unfair competition claim at the time of enactment. Id. at 1271 (statutory term interpreted in accordance with its plain meaning where not explicitly defined). It has long been recognized that trade secret misappropriation is actionable as one form of unfair

I i e r i ua b uu s t oy agaet C utok t t "rv i s fh w o n n r en nm i os tu r l ug,h orl so h poio o t hl tp t g g at n e o e sn e e l , n t i oj t n ply i ad i t t r eat tu r l gae Aulston v. a ad o t b c ad o c, n dio o h e vn s t oy a ug. w s e i " tn e l at n United States, 915 F.2d 584, 589 (10th Cir. 1990).
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competition. See Julius Hyman & Co. v. Velsicol Corp., 123 Colo. 563, 606, 618, 233 P.2d 977, 1000, 1006 (1951) (treating misappropriation of trade secrets claim as one for unfair competition); Schulman v. Huck Finn, Inc., 350 F.Supp. 853 (D. Minn. 1972), a ' 472 F.2d 864 fd f (t Cr 17)( c cntu n am sprpii o t d sc t f l i i ... bod 8 i 93 " t ost i h . as itg i por t n f r e er s a wt n a ao a e l h ra df io o w a cntu s `na cm et n" ( e n i f ht ost e uf r o pti ' citing 44 AM.JUR.2d Monopolies, itn it i io ) Restraints of Trade, and Unfair Trade Practices § 704 (1971)). F r e i i t no C nr s i etobod poi t c o uf r o pti i ut rn c i f oge ' n n t ral rh iat f na cm et n s h d ao ss t y b s i io evident in section 44 of the Lanham Act, 15 U.S.C. § 1126, concerning international conventions.2 Sco 4() x nsoay"e o w oecut o oi ni a a yt ay et n 4b et d t n pr n hs on y f r i s pr o n i e s r g t cnet no t a r an t ... t r r s no uf r o pti ,ow i ovn o rr t e t g o i e y li h e e i f na cm et n t h hthe United e p so i io c Sa ss l a a y... t bnfs fsco 4] to the extent necessary to give effect to te ia o pr t s t h ee to [ t n 4 ... e i ei ay poio o sc cnet n t a o r i oa l . 1 USC § n rv i f uh ovn o, r t r e p cl a " 5 ... 1126(b). sn i ey cr w The

"ee t o sco 4 i l et t [ n pr nds nt i sbet n() sa b bnfs f et n 4 n u h " ]y e o ei a d n usco b ... hl e i" i cd a a s g e i l entitled to effective protection against unfair competition, and the remedies provided in this chapter for infringement of marks shall be available so far as they may be appropriate in repressing acts of unfair competition. 1 USC § " 5 ... 1126(h). Section 44(i), which extends to " tes r ei n o t U idSa s t sm bnfs s r gat ... t pr n [c]izn o r d t fh n e te ... h a e ee t a a r e i ses e t t e i e nd o e os s dsr e i sbet n b,1 USC § 16i hs en n rr e a "of [n] lr h ec bd n usco () 5 ... 12(, a be i e e d s cne r g a i t i i " ) tp t ri lg s

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Congress enacted section 44 to comply with the directive of the International Convention for the Protection of Industrial Property (the Paris Convention) that signatories (including the United States) afford to citizens of other signatory countries protection against acts, including unfair competition, that the Convention prohibits. BP Chemicals, Ltd. v. Baloun, 183 F.Supp.2d 1158, 1161 (E.D. Mo. 2000). 5

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given o oe n aoa udruscosb ad h t US ci n. BP Chemicals, Ltd. v. t fr g nt nl ne sbet n () n ()o ..iz s i i s i te " Baloun, 183 F.Supp.2d 1158, 1161 (E.D. Mo. 2000). Section 44 has two-fold application to this case. First, the section further evidences congressional intent to include broad protection against unfair competition in the Lanham Act for citizens of foreign countries and, through subsection (i), to extend the same protections to U.S. citizens and residents. Second, through the operation of the Paris Convention, section 44

includes trade secret misappropriation within the unfair competition protections of the Lanham Act. The Paris Convention, which section 44 effectuates (supra n.2), includes protection against uf r o pti , e ndi t C net na "n a of competition contrary to honest na cm et n df e n h ovn o s ay ct i io i e i pate i i uta o cm e i m tr" BP Chemicals, 183 F.Supp.2d at 1161. Section r i sn n si r o m r a ae . cc d rl c l ts 44 provides foreign nationals identified in subsection (b) a remedy to vindicate the substantive rights granted in the Paris Convention or, alternatively, confers upon such foreign nationals the right to take advantage of unfair competition remedies available to U.S. citizens under federal or state law. BP Chemicals, 183 F.Supp.2d at 1162. Under either approach, a claim for trade secret misappropriation is available to foreign nationals under the Lanham Act. BP Chemicals, 183 F.Supp.2d at 1161 (recognizing that foreign national can bring trade secret misappropriation claim under the Lanham Act). Subsection 44(i) extends this right to bring Lanham Act claims for trade secret misappropriation to U.S. citizens. Id. Consistent with the express provisions of the Lanham Act concerning its broad applicability to acts of unfair competition, courts considering the question have concluded that the Lanham Act includes a remedy for trade secret misappropriation. In Repap Enterprises, Inc. v. Kamyr, Inc., 27 U.S.P.Q.2d 1685, 1690, 1993 WL 322881 (E.D. Pa. 1993) (unpublished

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opinion attached as Ex. 1), e ornt t tet n 3a " t cut o d h sco 4( proscribes not only acts that would h e a i ) technically qualify as trademark infringement, but also unfair competitive practices involving at l r o n a dcp o"adhl t t e nat i a dsco 4( t og f s o c a o pt tl eet n n e h df dn v le et n 3a h uh a e r u ei i d a e ot i ) r l misleading statements ­includi fi apt t plao t tnopr e p i i' t d n in g l g a n ap ct n h i roa d ln fs r e e i i a c t a tf a secrets ­that defendant owned trade secrets it had misappropriated from plaintiff. See also H a ho tLd vRvr E g P am L.L.C., 2005 WL 356839 at *3 (W.D. Tex. Feb. 14, el pi , t . i ' de hr s., t n . es 200) df i uf r o pti c i s wt nt a b o sco 4( "b r e net 5 (e n g na cm et n lm " i i h m i f et n 3a y e r c o in i io a h e t i ) fe "tu r ad o-statutory causes of action arising out of business conduct which is contrary to s t oy n nn at hns pate i i uta o cm e i m tr" i l i t oet r i n n si r o m r a ae , n u n heft of trade secrets) cc d rl c l ts cd g (unpublished opinion attached as Ex. 2). The Lanham Act also provides for contributory liability. In Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 855 (1982), the Supreme Court recognized that the Lanham Act imposes liability on those who contribute to violations of the Act, holding that a drug company could be liable for trademark infringement if it induced pharmacists to whom it sold generic drugs to mislabel them as branded or supplied the pharmacists knowing that they were engaged in mislabeling. Lower courts have subsequently recognized liability for violation of the Lanham Act based upon a variety of contributory activities, including distribution of gasoline to service-station dealers knowing or having reason to know that the dealers planned to misbrand it, Power Test Petroleum Dists., Inc. v. Manhattan & Queens Fuel Corp., 556 F.Supp. 392, 395 (E.D.N.Y. 1982); publishing a book that listed plaintiff (by reference to its registered trademark) as a source for potential business scams, National Fed. of the Blind, Inc. v. Loompanics Enters., Inc., 936 F.Supp. 1232, 1244 (D. Md. 1996); and selling blank audiotapes

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ad ulan eu m n ko i t th pr ae w r ui t m t cut f t ln fs n dp ct g qi etnwn h t uc sr e s gh o on r ip i i' i i p g a e h s e n e e e a tf products, A&M Records, Inc. v. Abdallah, 948 F.Supp. 1449, 1457 (C.D. Cal. 1996). Wht r osudacri t D m r t udl nr w i e r ao o t bod e e cnt e cod g o e a ss nu a o n r e t n rh ra h r n e' y r t p ti e interpretation that Congress intended, PolyRock states a claim against Demarest under the L na A t Sco 4( () ) rh i ay f s o m s ai dsr t n fato f s ahm c et n 3a 1( poi t n " l r ied g ec p o o f , ra e . i ) A bs ae l n ii c l or misleading representation of fact, which is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by ao e pr n 1 USC § nt r e o. 5 ... 1125(a)(1)(A). PolyRock alleges that Demarest (along with the h s " other defendants) use P l oksr e er so auat e rf i s n bi i pout d o R c't d sc ttm nf u a ic lt e u d g rdc . y a e c r tia o ln s As a matter of evidence at trial, PolyRock will show that through the use of its trade secrets defendants sought to manufacture products identical or confusingly similar to those of PolyRock, which they deceptively offered as their own. Such activities falsely represented the origin of df dn ' rdc adt nt e fhio P l oks o m r aat ie i v li o e nat pout n h a r o t r r oy c' cm e i cv i n i ao f e s s e u e R c l i ts o tn sco 4( () ) E e udr e a ssetrictive reading that section 43(a)(1)(A) prohibits et n 3a 1( . vn neD m r t r i ) A e' s ol "as gof gos f n slr shs o ao e P l oks t a lm aa sh n ps n f od o oe ee a t e f nt r oy c te c i gi t i y i " l o h, R as a n m under section 43(a)(1)(A). In essence, PolyRock contends that defendants engaged in passing off by misappropii P l oksm nf t i poest c a ad sl r la o r t g o R c' aua u n rcs o r t n e e i s f an y c rg ee l pc P l okspout r hr hnby m r ym sr d gP l oksgos D m r tw o o R c' rdc ,a e t y s t a e l i a i oy c' od. e a s h e bnn R e, manufactured goods for General Steel and Genstone or assisted them to set up their own manufacturing, was integral to these activities and is therefore responsible under subsection 43(a)(1)(A).

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Section 43(a)(1)(B) prohibits a person from "o m r aavrs g r rm t n[ a cm e i de in o po o o t t cl ti i h] misrepresents the nature, characteristics [or] qualities ... of his or her o ao e pr ns od, r nt r e o'gos h s sri so cm e i at ie. 1 US . 1125(a)(1)(B). Demarest argues that PolyRock e c , r o m r a cv i " 5 .. § ve c l i ts C de ntot d e a ipt i t o e df dn 'a e de in i v li o sco os o cn n h prc a d n h t r e nat f s avrs g n i ao fet n e ti e e h e s l ti o tn i 43(a)(1)(B). To the contrary, PolyRock contends that Demarest, through his use of the

Por t yIfr ao t r la P l okspout provided the means for the other rpia nom t n o e i t oy c' rdc , er i pc e R s df dn t f sl avrs t i pout ui P l oksm t is D m r tt s e nat o a e de i h r rdc s g oy c' a r l e s l y te e s n R ea . e a s h e u participated d et i df dn 'a e de in v li s ra a i m m contributed to i cy n e nat f s avrs g i ao o,t m n u , r l e s l ti o t n i df dn ' a eavrs gko i o hv gr snt ko t th pout w u b e nat f s de in nwn r ai e o o nw h t rdc ol e e s l ti g n a a e s d m s peet a t df dn ' w .U druh i u s ne, e a scn e held liable, ier n d sh e nat o n ne sc c cm t csD m r ta b r s e e e s r a e directly or contributorily, for his or his co-df dn ' i aos fh poi t n o f s e nat v li o t rh ios n a e e s o tn e bi l advertising of Section 43(a)(1)(B). For this reason as well, PolyRock states a Lanham Act claim against Demarest.3 When interpreted in accordance with the properly broad interpretation that Congress intended, PolyRock likewise states a Lanham Act claim against Demarest. The Act broadly prohibits unfair competition, which has traditionally included claims for misappropriation of trade secrets. (Supra at 4-5.) PolyRock alleges that Demarest engaged in trade secret

misappropriation under circumstances that courts have recognized as coming within the prohibitions of the Lanham Act. Cf. Repap Enterprises, 27 U.S.P.Q.2d 1685 (finding violation
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If the Court were to conclude that PolyRock has not adequately pled its claim against Demarest for contributory liability under section 43(a), see, e.g., Procter & Gamble Co. v. Haugen, 317 F.3d 1121, 1129 (10th Cir. 2003), PolyRock requests leave to replead, see McKinney v. State of Oklahoma Dept. of Human Svcs., 2 F d33 35(0 Cr19)" 95 . 6, 6 1t i 91 ( 2 h . preferred practice is to accord a plaintiff notice and an opportunity to amend his complaint before acting upon a motion td m s fraueo te c i " o i i o f l t s ta lm ) s s ir a a . 9

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of Lanham Act where defendant misrepresented trade secrets of plaintiff as its own). Demarest ce n at ry htuh r e er m sprpii c i s r otd o t L na A t is o u oi t sc t d sc t i por t n lm a u i fh ahm c s t h t a a e a ao a e se e ' purview. In sum, whether the Lanham Act is construed narrowly or broadly, PolyRock states both false designation of origin and false advertising claims against defendant Demarest under section 4( . e a ss o o t d m sf lfrh r sn l e 3a D m r t m t n o i i aso t se o a n. ) e' i s s i i a o III. THE COURT HAS ORIGINAL AND SUPPLEMENTAL JURISDICTION OVER POLYRO K SS A EL W C A MS G I S D MA E T C ' TT A L I A AN T E R S . R grl s fh C ut r o t no D m r t m t nt d m s t L na A t ea e o t ors e l i f e a ss o o o i i h ahm c ds e ' s uo e' i s s e claim, his motion t d m s P l oks tel c i s o i i oy c' s t a lm fails because the Court has original s s R a w a jurisdiction over those claims, and even if it did not, the Court can and should exercise supplemental jurisdiction in the interests of justice and judicial economy. A. T e C utH s O i n lJ r dc o O e P l oks Sae L w Ca h o r a r ia ui i i g s t n vr o R c' tt a y l ms i Pursuant to 28 U.S.C. § 1338(b). As applied to this case, 28 U.S.C. § 1338(b) clearly confers original jurisdiction over P l oks te a c i s gi t e a s r a l s f o t C utu s nt m t n o R c' s t l lm aa sD m r t e r e o hw h orrl o h o o y a w a n e, g d s e e e i t d m s P l oksL na A t lm Section 1338(b) grants the federal district courts o i i o R c' ahm c c i . s s y a "r oiginal jurisdiction of any civil action asserting a claim of unfair competition when joined with a us n aad e t c i udrh ... t dm r l s T e or hv bod cnt e sbt tln r a d lm ne t ai le a e r e a a . h cut ae ral osud a k w" s y r "na cm et n a ue i § uf r o pti " s sd n 1338(b) to include claims asserting trade secret i io misappropriation whether based upon tort or contract law theories. Telechron, Inc. v. Parissi, 197 F.2d 757, 761 (2d Cir. 1952); River Brand Rice Mills, Inc. v. General Foods Corp., 334 F.2d 770, 773 (5th Cir. 1964); Schulman v. Huck Finn, Inc. 350 F.Supp. 853, 856 (D. Minn. 1972),

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a' fd472 F.2d 864 (8th Cir. 1973) (claims for breach of implied contract, breach of confidential f relationship and misappropriation of confidential information were claims for unfair competition within meaning of § 13() Ca s r " le" i i t m ai o § 38b) lm a r a d wt n h en g f 1338(b) where there . i e et h e n ia cni r l oe a i t if t l ai" Pursche v. Atlas Scraper and Eng' Co., 300 s "os e b vr p n h ra u bs . dae l e ca s g F.2d 467, 483 (9th Cir. 1961); River Brand, 334 F.2d at 773. Contrary to De a ssa u etMo a 2 nn. 1 & 2), § 1338(b) does not apply m r t r m n ( t t -3, e' g . solely in cases alleging infringement of a registered trademark. The Lanham Act (originally called the Trademark Act of 1946, 60 Stat. 441), sets forth federal law governing trademarks. Claims brought pursuant to the Act therefore constitute claims under the trademark laws within the meaning of § 13() T ecut t t aecni r t i u gnr l hl t t ay 38b. h or h hv os e d h s e ee l o h "n s a de e s ay d a claim arising under § 43(a) of the Lanham Act, whether or not it involves a patent, copyright, or t dm r,sac i a s g`ne t cpr h pt t o t dm r l s wt nt r e a i lm ri udr h oyi t a n ... r r e a a ' i i h a k a in e g, e a k w h e meaning of § 13() Natcontainer Corp. v. Continental Can Co., 362 F.Supp. 1094, 1101 38b. " (S.D.N.Y. 1973); N.S. Meyer, Inc. v. Ira Green, Inc., 326 F.Supp. 338, 342 (S.D.N.Y. 1971). In Schulman v. Huck Finn, 350 F.Supp. 853, the court considered whether § 1338(b) provided federal jurisdiction over state law claims in a situation very similar to this case. Plaintiff in Huck Finn asserted a federal claim for patent infringement and a state law claim for unfair competition against multiple defendants, two of whom sought dismissal of the unfair cm et n lm frak fuj t ae j i ii uo t C ut d m s l fh pt o pti c i o l o sb cm tru s co pn h ors i i ao t a nt io a c e t rd t n e ' s s e e claim against them. The two moving defendants argued that § 1338(b) could not confer

jurisdiction over the unfair competition claim if the court were to dismiss the patent claim aa s t m T e cut hw vr d ar d f d g t tt "xr sl gae o ... gi t h . h or o ee i ge , i i h h epe a ug f n e , , s e nn a e s n

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[§ 1338(b)] contains no requirement that the defendants in the unfair competition action be the sm a t df dn i t pt tnr gm n at n Huck Finn, 350 F.Supp. at 857. a e s h e nat n h a n i i e et co. e e s e e fn i " Is a,h s t e m r yr u e" hth f e l lm i"us n a adt f e l n nt d t tu " e l e i s t t e r c i s sbt tl n h e r ad e e at e qr a e da a a i" e da s t l c i sa " le. Id. The court concluded that, for purposes of the motion to te a lm r r a d a w a e et " d m s t pt tc i w s"us n a bcue t nn i i , h a n lm a sbt tl eas h o-moving defendants had not s s e e a a i" e challenged it. Id. at 856. The patent and unfair competition claims were " related"because, although asserted against different defendants, they derived from a common nucleus of operative fact. Id. at 858. The court therefore had original jurisdiction over the state law unfair

competition claims against the moving defendants, even though the court had dismissed the federal patent claim against them. Id. at 859. The Eighth Circuit affirmed. 472 F.2d at 867; see also Astor-Honor, Inc. v. Grosset & Dunlap, Inc., 441 F.2d 627, 630 (2d Cir. 1971) (where p i i bogt ee l oyi t lm aa s t e df dn t " tr f h s t e ln f ruh f r cpr h c i s gi th e e nat h lt o t tu " a tf da g a n r e s e ee e at conferred jurisdiction over a related state law unfair competition claim against a fourth defendant). Huck Finn and Astor-Honor show that the Corhsui ii oe P l oks te ut a j s co vr o R c' s t rd t n y a law claims against Demarest pursuant to § 1338(b). Defendants General Steel, Genstone and Knight answered the Lanham Act claim; therefore, the claim must be presumed substantial for purposes of § 1338(b). Huck Finn, 350 F.Supp. at 856. The Lanham Act and state law claims a r a d eas a a s ot f cm o nc u o oe t e at P l oks lgt n r e t bcue l re u o a o m n ul s f pr i f s o R c'aeaos e le li e av c : y l i that defendants misappropriated and used the Proprietary Information to manufacture and sell a knock-off product, which they misrepresented and deceptively advertised, in competition with

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PolyRock. (See supra at 2-3.) In these circumstances, the Court has independent and nond c t nr oi nlui ii oeP l oks tea c i s gi Demarest. i r i a r i j s co vr oy c's tl lm aa s eo y g a rd t n R a w a nst B. Even Were The Court To Dismiss All Claims Against Demarest Arising Under Federal Law, Supplemental Jurisdiction Over The State Law Claims Is Appropriate In This Case. The doctrine of supplemental jurisdiction codified at 28 U.S.C. § 1367 provides a further i eedn bs frh C uto xr s j i ii oe P l oks tea c i s gi t n pnet ai o t ort ee i u s co vr oy c's tl lm aa s d s e c e rd t n R a w a n D m r t gi wt u r a t t f e f oy oks ahmA tlm I cm i t n2 e a s aa i ote r o h a o P l c'L na cc i . n o b ao,8 e, n h gd e t R a ni U.S.C. §§ 1367(a) and (c) provide that, following dismissal of all claims over which the Court has original jurisdiction, it has the discretion to retain jurisdiction over related state law claims provided the federal claims were not insubstantial from the outset. U id n l o i sIcv n e It H l n ,n.. t ' dg Wharf (Holdings), Inc., 210 F.3d 1207, 1220 (10th Cir. 2000). The test for relatedness is whether the federal and state claims arise from a common factual nucleus. Id. It is well-settled that § 1367 confers jurisdiction over state law claims that are part of the same case or controversy (i.e., that arise from a common factual nucleus) as the claims upon which federal jurisdiction is premised, even where the state law claims are against parties who are not named in the federal claims. See, e.g., Exxon Mobil Corp. v. Allapattah Servs., Inc., 125 S.Ct. 2611, 262021 (2005) (§ 16 da s od t co bten"edn lm ad"edn a y css n 37 r n ii t n e e pnet a " n pnet r " ae ad w sn i w -c i -p t " ]eatet c o § [h l sn ne f 1367(a) makes it clear that the grant of supplemental jurisdiction extends t s e to claims i o i j neo i e et n fdioapre. n l n o dr rn r n o o ad i l a i " vvg i tv i tn ts ) This case is clearly one in which the Court, if necessary, should exercise its supplemental jurisdiction under 28 U.S.C. § 16( t dc e o R c' s t l c i s gi t e a s 37c o ei P l oks te a lm aa sD m r t ) d y a w a n e. The Court hsui ii oe P l oks ee l n s t l c i s gi t ee l t l a j s co vr oy c' f r ad te a lm aa sG nr Se , rd t n R da a w a n a e

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G nt e n K i tadt s c i s i poedo t im rsnt s or P l oks es n ad n h n h e lm wl rce n h r e ti h C ut o R c' o g, o a l e i i . y claims against Demarest and the other defendants arise out of a single set of factual circumstances such that all claims would ordinarily be tried in a single proceeding. (Supra at 23, 12); see United Mine Workers of America v. Gibbs, 383 U.S. 715, 725 (1966) (predecessor dc i o pnetui ii dpne uo w e e "te n f e llm ... dr e rm otn f edn j s co eedd pn ht r s tad e r c i s e v f re rd t n h a da a i o a o m nnc u o oe t e atsc t th p i i " ol od a l b epc dt t cm o ul s f pr i f " uh h t ln f w u ri ry e xet o r e av c a e a tf d ni e y t ma ioeuiapoed g) h l n n j c l rcei " e l di n . T e cs l ades g s irc i ssog spot t C ut ee i o h ae a dr i i l lm t nl upr h ors xr s f w sn m a a r y s e ' ce sup m n lui ii i t s ae I bt t Egt Cr is p i i Huck Finn, 472 pl et j s co n h cs. n o h i h i u ' oi o n e a rd t n i h e h ct nn F2 a86 adt Scn Cr is p i i Astor-Honor, 441 F.2d at 630, the courts relied . t 6,n h eod i u 'oi o n d e ct nn on pendent (now supplemental) jurisdiction as an alternative basis for concluding that federal jurisdiction existed over the state law claims asserted in each case. Both cases found pendent jurisdiction over state law claims of unfair competition that arose out of the same factual nucleus as federal claims (a patent claim in Huck Finn and a copyright claim in Astor-Honor) against other defendants. The courts in both cases had little difficulty in concluding that it was the most apor tue fh cut adpre' prpie s o t ors n a i resources for the district court to exercise jurisdiction a e ' ts over the state law claims. See Astor-Honor, 441 F.2d at 629-3 ( t ol b a uj ti l 0 " w u e n n sf b I d u ia e waste of judicial and professional time ­ indeed, a travesty on sound judicial administration ­ to allow [plaintiff] to try its unfair competition claim against [the defendants against whom it had a federal claim] in federal court but to require it to prosecute a claim involving precisely the same f taa s[ e h ddf dn aa sw o p i i d nt s ra ee l lm ` s t a s gi tt t r e nat gi t hm ln f i o as t f r c i ]i te c n h i e n a tf d e da a n a

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court a b c a a.) qo n Guaranty Trust Co. v. York, 326 U.S. 99, 109 (1945)); Huck l k w y " (ut g o ' i Finn, 472 F.2d at 866 (quoting the above passage from Honor-Astor). As in Huck Finn and Astor-Honor, oy oks te a c i s gi t e a sa s P l c' s t l lm aa sD m r t re R a w a n e i out of the same facts as its federal claims against the remaining defendants and thus satisfy the relatedness test for supplemental jurisdiction.4 Iw u uncs ry att pre' n t t ol nees i w s h a i ad h d al e e ts e cut r or so eu e o R c tpr etuf ro pti c i s or'e uc tr i P l oko us i na cm et n lm against Demarest in s s e qr y u s i io a state court while prosecuting the same claims under the same facts against the other defendants in this Court. A cri l a a ae av t ee in j i ii oe P l oks tea c i s cod g ,s n lr t eo xr s gu s co vr o R c's tl lm ny tn i c i rd t n y a w a under 28 U.S.C. § 1338(b), the Court has the authority and should exercise its discretion to adjudicate those claims under 28 U.S.C. § 1367. CONCLUSION Whether construed broadly, as Congress intended, or narrowly, as Demarest requests, the Lanham Act provides PolyRock with a federal cause of action against Demarest. The motion to dismiss therefore fails for this reason alone. At nt e , vnw r t C utogat i i a o P l oks ahm A t lm lravl ee e h ort r d m s l f o R c' L na c c i e i y e e n s s y a against Demarest, 28 U.S.C. §§ 1338(b) and 1367 confer jurisdiction over PolyRoc' s tl ks tea a w claims against him. The jurisdiction of § 1338(b) is non-discretionary and must be exercised. The jurisdiction of § 1367, while discretionary, should be exercised in this case to further the

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Supplemental jurisdiction under § 1367 also supports retaining jurisdiction over any state law claims that the Court concludes are not within § 1338(b) on grounds that they do not constitute claims for unfair competition. In such a circumstance, state law claims within § 1338(b) as well a P l oksL na A t lm srea t pei t f e l lm frt ee i o s oy c' ahm c c i e R a v s h r c e e r c i s o h xr s f e da da a e ce supplemental jurisdiction. 15

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interests of justice and judicial economy. Demar t m t nt d m s P l oks tel e ' o o o i i o R c' s t a ss i s s y a w claims should be denied for this reason as well. REQUEST FOR ORAL ARGUMENT P l ok eus oaa u et n e a ss o o i odro dr s n qet n o R c r et r r m n o D m r t m t n n re t ade ay usos y q s lg e' i s i the Court may have concerning the law relied upon or positions outlined herein. DATED: September 9, 2005 Respectfully submitted s/ John A. DeSisto John A. DeSisto W. Curtis Graves FEATHERSTONE DESISTO LLP 600 17th Street, Suite 2400 Denver, Colorado 80202 Telephone: (303) 626-7100 Facsimile: (303) 626-7101 E-mail: [email protected] E-mail: [email protected] Attorneys for Plaintiff PolyRock Technologies, LLC

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CERTIFICATE OF SERVICE I hereby certify that on September 9, 2005, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send notification of such filing to the following e-mail addresses: Susan M. Hargleroad Pendleton, Friedberg, Wilson & Hennessey, P.C. [email protected] Kurt S. Lewis Lewis Scheid LLC [email protected]

s/ John A. DeSisto John A. DeSisto W. Curtis Graves FEATHERSTONE DESISTO LLP 600 17th Street, Suite 2400 Denver, Colorado 80202 Telephone: (303) 626-7100 Facsimile: (303) 626-7101 E-mail: [email protected] E-mail: [email protected] Attorneys for Plaintiff PolyRock Technologies, LLC