CANFIELD SCIENTIFIC, INC. v. DR. RHETT DRUGGE, 2:16-cv-04636

Background

Melanoscan owns U.S. Patent No. 7,359,748 (the '748 Patent); Dr. Rhett Drugge is the inventor and Melanoscan's founder. Canfield manufactures the Vectra WB360 imaging system and had communications with Memorial Sloan Kettering (MSK) and Princess Alexandria Hospital (PAH).
On June 18, 2016 Dr. Drugge emailed numerous dermatologists and institutions accusing a scanner (with an attached image) used at MSK of infringing Melanoscan's patent; the email did not name Canfield or the Vectra WB360.
On July 15, 2016 Melanoscan's attorney sent letters: one to Canfield and one to PAH accusing Canfield of infringement and asking PAH to refrain from further purchases from Canfield.
Canfield sued seeking (inter alia) declaratory judgment of noninfringement and claims for tortious interference, Lanham Act § 43(a) false advertising/unfair competition, commercial disparagement (trade libel), and common-law unfair competition. Defendants moved to dismiss Counts II–V.
Court dismissed Count II (tortious interference) and Count IV (commercial disparagement) without prejudice for failure to plead damages and specific lost economic relationships; also dismissed claims based on the July 15 letters. The Court denied dismissal of Counts III and V insofar as they rely on the June 18 email, finding the email plausibly qualifies as commercial speech. Plaintiff given 30 days to amend.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether June 18 email and July 15 letters support Lanham Act and common-law unfair competition claims	June 18 email and July 15 PAH letter falsely accused Canfield's Vectra WB360 of infringement and were intended to harm Canfield's business	July 15 letters are cease-and-desist/notice (not commercial advertising); June 18 email did not identify Canfield or its product, so not commercial speech as to Canfield	June 18 email: plausible commercial speech as pleaded — Counts III and V survive as to June 18 email only. July 15 letters: not commercial advertising — allegations based on them dismissed.
Whether Canfield plausibly pleaded tortious interference with existing or prospective contracts (Count II)	Alleged relationships and a purchase order from MSK and that defendants intentionally interfered in bad faith causing lost business	Plaintiffs fail to identify any lost contract, customer, or concrete damages causally linked to defendants' communications	Dismissed without prejudice for failure to plead specific lost transactions, reasonable probability of prospective contracts, and damages; also insufficient allegation that Drugge knew MSK was using Canfield when he sent the June 18 email.
Whether Canfield pleaded commercial disparagement/trade libel (Count IV) with requisite special damages	Alleged loss of goodwill and lost or prospective sales with MSK and PAH and other recipients of email	Must plead pecuniary harm with particularity (specific lost customers or general diminution with extrinsic facts); conclusory statements insufficient	Dismissed without prejudice for failure to plead special damages with particularity.
Whether Dr. Drugge had requisite knowledge/intent re: Canfield in June 18 email	Canfield contends the email referred to Vectra WB360 in use at MSK and shows intent to harm Canfield	Email does not name Canfield or Vectra; content points to MSK (physicians) as the actors; no plausible factual allegation that Drugge knew MSK was using Canfield when he sent email	Court: Canfield failed to plausibly plead Drugge knew the scanner was Canfield's based on the email alone; need more facts in amended complaint to show knowledge/intent re: Drugge.

Key Cases Cited

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim for relief)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (courts need not accept legal conclusions; plausibility standard explained)
Avaya Inc. v. Telecom Labs, Inc., 838 F.3d 354 (3d Cir. 2016) (elements of tortious interference under New Jersey law summarized)
Santomenno ex rel. John Hancock Trust v. John Hancock-Life Ins. Co. (U.S.A.), 768 F.3d 284 (3d Cir. 2014) (documents outside complaint may be considered when central and referenced)
Connelly v. Lane Constr. Corp., 809 F.3d 780 (3d Cir. 2016) (pleading standard requires facts supporting a reasonable expectation discovery will uncover proof)
Gordon & Breach Sci. Publishers v. American Institute of Physics, 859 F. Supp. 1521 (S.D.N.Y. 1994) (four-part test for whether speech is commercial advertising/promotion under Lanham Act)
Phillips v. County of Allegheny, 515 F.3d 224 (3d Cir. 2008) (court must accept factual allegations as true and draw inferences for plaintiff)
Baraka v. McGreevey, 481 F.3d 187 (3d Cir. 2007) (courts need not accept unwarranted inferences or legal conclusions)