Crafty Prods., Inc. v. Michaels Cos.
Crafty Prods., Inc. v. Michaels Cos.
Opinion of the Court
Plaintiffs Crafty Productions, Inc. ("CPI") and Crafty Productions, LLC ("CPL") (collectively "Plaintiffs") commenced this action against numerous defendants alleging copyright infringement of CPI's original craft designs and products, trade dress infringement, intentional interference with prospective business advantage, unfair competition, breach of contract, and fraud. Many parties were listed as defendants in the first complaint, but various defendants have been dismissed for lack of personal jurisdiction. (ECF No. 213.) As relevant here, Defendants The Michaels Companies, Inc. and Michaels Stores, Inc. (collectively, "Michaels") and Hobby Lobby Stores, Inc. moved to dismiss Plaintiffs' prior complaint for failure to state a claim. (ECF No. 90.) The Court granted the motion to dismiss and granted Plaintiffs leave to amend. ("Prior Order," ECF No. 214.) Plaintiffs filed a second amended complaint against Michaels; Plaid Enterprises, Inc.; Hobby Lobby Stores, Inc.; Party City Holdings, Inc.; and Party City Corporation. ("SAC," Second Amended Complaint, ECF No. 232.) Plaintiffs allege trade dress infringement, intentional interference with prospective business advantage, and unfair competition. Michaels moves to dismiss the second amended complaint. ("Mot.," ECF No. 233.) Defendants Hobby Lobby; Party City Holdings, Inc.; Party City Corporation; and Plaid Enterprises, Inc. join the Motion to Dismiss with respect to paragraphs III(A)(1)-III(A)(4) and III(B) of the Motion. (ECF Nos. 235, 236, 238.) Plaintiffs filed an opposition to the Motion, *879("Opp'n," ECF No. 239), and Michaels filed a reply in support of the Motion, ("Reply," ECF No. 240).
The Court finds this Motion suitable for determination on the papers and without oral argument. Civ. L. R. 7.1(d)(1). For the reasons stated below, the Court GRANTS Defendants' Motion.
I. FACTUAL BACKGROUND
Plaintiff CPI has created various "original product concepts and designs, including many creative, decorative wood products." (SAC ¶ 11.) Sometime in 1995, CPI hired Michelle Faherty as a sales representative for some of its products. (Id. ¶ 13.) Ms. Faherty asked permission to take samples of certain products so she could obtain a manufacturing cost estimate from a factory she knew in China. (Id. ) She did so, and then CPI began using a Chinese manufacturer owned by Kevin Xiao and/or Tony Zhu for cost-saving purposes. (Id. )
In 2009 or 2010, CPI learned that replicas of its products were being sold in a crafts and toys product catalog from "Zhejiang Hongye Art & Craft Co., Ltd." (hereinafter, "Hongye"). (Id. ¶ 15.) CPI had not approved these sales and had never heard of Hongye. (Id. ) CPI learned that the Hongye factory was shipping CPI's wood products to Michaels and Plaid. (Id. ¶ 16.) Plaid is CPI's competitor and supplies products to retailers, including Hobby Lobby and Michaels. (Id. ¶ 19.)
CPI insisted on visiting China to meet Zhu and see his manufacturing facilities. (Id. ¶ 16.) On this trip, CPI first visited the Hongye factory, where it saw on display many of CPI's "original designs and products." (Id. ¶ 17.) Faherty allegedly had to lie to the Hongye representative to arrange a tour of the factory for CPI. (Id. ) "There appeared to be no effort by the manufacturer to disguise the fact that they were producing unauthorized CPI products." (Id. ) CPI alleges it saw a frame at the factory that was "substantially similar to one of CPI's designs" but had the name "Plaid" on the back. (Id. ¶ 19.) CPI then visited Zhu's manufacturing facility, which contained only a few of CPI's products, and CPI was surprised that Hongye appeared to have more of CPI's designs in its factory than were in Zhu's factory. (Id. ¶ 18.) Faherty told CPI that Zhu's factory was only manufacturing CPI's products, not competitors' products. (Id. ¶ 19.)
Plaintiffs allege Faherty and Zhu arranged the manufacture of "knock offs" of CPI's original designs and products to sell to Plaid and other retailers. (Id. ¶ 22.) Plaintiffs allege the only way the Hongye factory would have access to CPI's products is if a retail buyer or Faherty provided the designs to the factory. (Id. ¶ 32.) Plaintiffs allege Michaels was buying the knock-off products from the Hongye factory. (Id. ) In support, Plaintiffs allege Michaels purchased products from CPI for many years, but as of October 2014, "was buying very little from CPI" yet still selling products. (Id. ¶ 46; see, e.g. , ECF No. 232-2, at 14-22 (images of products being sold in Michaels' stores in 2014 and 2015).) Plaintiffs also allege CPI never sold wood alphabets to Michaels, yet Michaels has sold CPI's wood alphabets in its stores. (Id. ) Similarly, Plaintiffs allege Hobby Lobby purchased knock-offs of CPI's products through Faherty. (Id. ¶ 51.)
*880II. LEGAL STANDARD
A complaint must plead sufficient factual allegations to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal ,
A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6) ; Navarro v. Block ,
III. ANALYSIS
Defendants' first argument is that Plaintiffs engage in improper "shotgun pleading." (Mot. at 13-14.) Rather than analyze the Complaint as a whole under this allegation, the Court will analyze the clarity and specificity of the allegations in its analysis of each cause of action below.
A. Copyright Infringement
The Court previously dismissed Plaintiffs' copyright infringement claims because Plaintiffs had not demonstrated "that the owner of the copyrights at issue-CPL-registered the copyrights with the Copyright Office before initiating this infringement action." (Prior Order at 10.) The Court then denied Plaintiffs' motion for reconsideration on the issue. (ECF No. 231.) At this point, it must be clear to all Parties that the claims have been dismissed and Plaintiffs are unable to cure the issue of prior registration of the copyrights. In the second amended complaint, Plaintiffs include the copyright claim "only for completeness." (SAC at 1 n.1.) The claim remains dismissed; thus, the Court does not analyze Defendants' Motion to Dismiss the copyright claim.
B. Trade Dress Infringement / False Designation of Origin
"Trade dress refers generally to the total image, design, and appearance of a product and 'may include features such as size, shape, color, color combinations, texture or graphics.' " Clicks Billiards, Inc. v. Sixshooters, Inc. ,
Defendants move to dismiss Plaintiffs' trade dress claim because "Plaintiffs fail to identify a protectable trade dress." (Mot. at 15.) Plaintiffs claim their trade dress is their "original designs and products." (SAC ¶ 61.) As examples of trade dress, Plaintiffs point to "all of the designs and products depicted" in Exhibits A through H and U. (Id. ) The referenced exhibits include hundreds of pictures of Plaintiffs' products. (ECF Nos. 232-2 to 232-9 and 232-22 to 232-23.) Plaintiffs include no further details as to what the general "design" of the products entails. Plaintiffs include examples of certain features of various products that they allege to be non-functional, for example "the shape and look of the hair and ears" of a vampire-shaped wooden mask. (Id. ¶ 68; ECF No. 232-2, at 13.) But Plaintiffs are not alleging their protectable design is based on the distinct "hair and ears" features. Nor could it, as all products in the referenced exhibits are different and not every product has "hair and ears."
In viewing the pictures Plaintiffs attach as "examples" of their trade dress, it is immediately clear to the Court that the products are all different. The products' only similarity is that they are crafts or decorations. But it is beyond debate that the products are still vastly different in terms of looks and design. Plaintiffs' products include a yoyo with a frog etched on the top; a hanging bird ornament; a wooden paddle with a ball attached to it by a string; a fabric heart necklace-and the list goes on. (ECF No. 232-2.)
In Walt Disney Co. v. Goodtimes Home Video Corp. ,
The Ninth Circuit has not yet adopted the "consistent overall look" test for trade dress claims based on a line of products. See Moroccanoil, Inc. v. Marc Anthony Cosmetics, Inc. ,
When the alleged trade dress consists of a certain look or style of different packaging for a number of different products, it is more difficult to prove that there is a common denominator among those packages which identifies plaintiff as the source. Plaintiff must prove that its alleged trade dress has a "consistent overall look."
1 McCarthy on Trademarks and Unfair Competition § 8:5.50 (5th ed. 2019). As detailed below, it is clear to the Court that Plaintiffs' products, when taken as a whole, present no consistent look. And even without the "consistent overall look" test, the Court finds it is insufficient for Plaintiffs to allege trade dress protection over a general "design," with no further detail, that would cover dozens of dissimilar products. To grant such far-reaching, undefined trade dress protection would unfairly allow inventors to claim any broad design and would leave no room for competition.
Plaintiffs seek to protect the trade dress covering a line of products that share little in common. Plaintiffs' broadly claimed trade dress includes "the design" of the products. (SAC ¶ 61.) But as a whole, the products differ vastly-they are made of different materials, are different shapes, serve different purposes, and have different designs. A square wooden puzzle with a Christmas tree stenciled on the top looks different than a wooden vampire mask and different than a felt purse with the word "Boo!" colorfully printed on the outside. (See ECF No. 232-2.) And how can the design of a sticker book of owls consist of the same design as a wooden gingerbread house or a wooden cube-shaped photo holder? (Id. )
Indeed, many courts require a plaintiff to "clearly articulate its claimed trade dress to give a defendant sufficient notice." Salt Optics, Inc. v. Jand, Inc. , No. SACV 10-828 DOC (RNBx),
For these reasons, the Court finds Plaintiffs have not sufficiently pled protectable trade dress. And although Defendants ask the Court not to do so, the Court will grant Plaintiffs leave to amend, to the extent Plaintiffs can more clearly describe the trade dress they seek to protect. See Creative Co-Op, Inc. v. Elizabeth Lucas Co. , No. CV 11-116-S-REB,
C. False Designation of Origin - California Law
Plaintiffs next bring a cause of action "under California law, including under
First, as to the state law trademark claims, these claims are based on the same allegations as the federal trademark claims. (Id. ¶¶ 95-96.) Claims for trademark infringement under California law are "subject to the same legal standards" as Lanham Act claims. Rearden LLC v. Rearden Commerce, Inc. ,
Second, Plaintiffs only include a bare reference to section 17500. This code section prohibits any statement in connection with the sale of goods "which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading."
D. Remaining State Law Claims
Defendants argue the Court should dismiss the remainder of Plaintiffs' state law claims as preempted. The Copyright Act of 1976 expressly preempts "all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by" the Act.
Plaintiffs' state law claims are intentional interference with prospective economic advantage and violation of California's unfair competition law. Defendants appear to assume the products are copyrightable under the first condition of the Sybersound test, therefore, the issue becomes whether the rights under the state laws are the same as the rights protected under the *885Copyright Act.
1. Intentional Interference with Prospective Economic Advantage
To establish a claim of intentional interference with prospective economic advantage, a plaintiff must show
(1) an economic relationship between the plaintiff and a third party, with a probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of this relationship; (3) intentional and wrongful conduct on the part of the defendant, designed to interfere with or disrupt the relationship; (4) actual disruption or interference; and (5) economic harm the plaintiff as a proximate result of the defendant's wrongful conduct.
Overstock.com, Inc. v. Gradient Analytics, Inc. ,
Here, the gist of Plaintiffs' claim is that Defendants knew of Plaintiffs' relationship with Fuqing but "went around" Plaintiffs to get cheaper pricing on the products from Fuqing, then sold the products in their stores without Plaintiffs' permission. (SAC ¶¶ 103-105.) Defendants allegedly contacted Fuqing and ordered Plaintiffs' designs and products directly through Fuqing rather than involving or paying Plaintiffs. (Id. ¶ 104.) By doing so, Defendants were able to secure "factory-direct" pricing from Fuqing. (Id. ¶ 103.) Then Defendants distributed, and/or sold Plaintiffs' designs or products. (Id. ¶ 105.) Thus, Defendants intentionally interfered with Plaintiffs' business with "customers, manufacturers, and potentially others." (Id. ¶ 105.) Defendants move to dismiss the claim as preempted.
Plaintiffs' opposition to Defendants' preemption argument is a total of one paragraph. (Opp'n 11.) Plaintiffs argue this claim is not preempted because it is based on Defendants "interfering with CPI's exclusive relationship with its manufacturer Fuqing." (Id. ) Plaintiffs conclude the paragraph by throwing in the vague and unhelpful ending: "[t]his is much more involved conduct than just copying a proprietary design, and involves much different elements and factual proof." (Id. )
In Brackett v. Hilton Hotels Corp. ,
*886But other courts have held differently, finding a plaintiff's intentional interference with economic advantage claim to be preempted in similar situations. In Media.net Advertising FZ-LLC v. NetSeer, Inc. ,
The main question here is, what is the nature of this cause of action? "[W]hether this claim is preempted ultimately turns on whether the gravamen of Plaintiff's claim is an alleged violation of Plaintiff's exclusive rights under the Copyright Act." 220 Laboratories, Inc. v. Babaii , No. CV 08-6125 PSG (SSx),
"[F]ederal copyright laws already protect the exclusive right of distribution."
*887Aagard v. Palomar Builders, Inc. ,
Here Plaintiffs make it clear they are accusing Defendants of distributing and/or selling Plaintiffs' copyrighted designs without Plaintiffs' authorization. (SAC ¶ 105.) These rights are already protected by federal copyright law. Plaintiffs' claim of intentional interference is "predicated on" the allegation that Defendants sold the copyrighted works, even though the claim also involves the element of Defendants interfering with the Fuqing relationship in order to obtain those works. See Media.net ,
2. Unfair Competition
The Ninth Circuit has explicitly found that claims of unfair competition brought under California's Business and Professions Code § 17200 are preempted if they are based on rights granted by the Copyright Act. See Kodadek v. MTV Networks, Inc.,
*888A plaintiff properly pleads a claim for unfair competition when the plaintiff alleges facts that show any unlawful, unfair, or fraudulent business act or practice.
Plaintiffs' unfair competition allegation stem from Defendants' acts "constituting intentional interference with prospective economic advantage." (SAC ¶ 109.) It appears the "unfair" act is Defendants' alleged interference with Plaintiffs' relationship with Fuqing. Thus, the same findings apply for this cause of action as they did for the intentional interference cause of action. The Court finds Plaintiffs' unfair competition claim to be preempted and GRANTS Defendants' Motion to Dismiss the cause of action. As noted above, the Court grants Plaintiffs leave to amend the claim.
IV. CONCLUSION
For the foregoing reasons, the Court GRANTS Defendants' Motion to Dismiss in its entirety. However, the Court grants Plaintiffs leave to amend the complaint. As noted, the copyright claims remain dismissed, and if Plaintiffs choose to leave the claims in the complaint "for completeness," Defendants need not again move to dismiss them. Plaintiffs are granted leave to amend their trade dress claims. Finally, the Court will grant Plaintiffs one final opportunity to amend their intentional interference and unfair competition claims to the extent they can show the claims are not preempted. Plaintiffs may file an amended complaint on or before July 8, 2019.
IT IS SO ORDERED.
A more comprehensive background can be found in the Court's prior order, (ECF No. 214). The following background history contains the relevant allegations as to the remaining Defendants.
Zhu's company is called Fuqing. (SAC ¶ 29.) Plaintiffs and Fuqing have arbitrated their claims. (ECF Nos. 215, 228.)
Defendants request the Court sanction Plaintiffs for including the copyright claim in the second amended complaint or award Defendants their attorney's fees spent responding to the claim. (Mot. at 9.) Although it was admittedly unnecessary for Plaintiffs to include the copyright claim in the operative complaint, Defendants were not required to spend substantial time moving to dismiss the claim. The Court finds sanctions and an attorney's fees award are unnecessary.
Other circuits have adopted the test and require the plaintiff to establish a consistent look when seeking trade dress for a line of products or images. See AM Gen. Corp. v. DaimlerChrysler Corp. ,
See, e.g. ,
Plaintiffs first argue that the state law claims cannot be preempted because "CPI's copyright claims have already been dismissed." (Opp'n 11.) This is immaterial. Certain state law claims are preempted by the Copyright Act itself, not by the specific copyright claims in a plaintiff's complaint.
In their opposition, Plaintiffs contradict their Complaint. They argue the intentional interference claim "is based not on Defendants' acts of 'manufacturing, distributing and/or selling the alleged copyrighted works,' but instead on the acts of interfering with CPI's exclusive relationship with its manufacturer Fuqing." (Opp'n 11.) The Court relies on what Plaintiffs plead in the Complaint, not their explanation in the opposition.
Further, the Court notes there is no support for the allegation that Defendants manufactured the allegedly infringing products, instead, the allegation is that they distributed and/or sold the products.
Michaels also argues Plaintiffs fail to state a claim under Rule 12(b)(6) for intentional interference because they have not "specifically allege[d] how Michaels interfered with Plaintiffs' prospective economic advantage." (Reply 4.) The Court disagrees; Plaintiffs have alleged all Defendants (who are retailers or distributors of craft goods) knew of Plaintiffs' relationship with Fuqing and intentionally disrupted this relationship by buying the products directly from Fuqing and distributing the products without Plaintiffs' involvement. (SAC ¶¶ 101-104.) If third party retailer-sellers buy products directly from the manufacturer rather than the designer of the products (so that the retailer-sellers can pay less for the products), the business relationship between the designer and the manufacturer is disrupted. Although the claim is preempted, it contains sufficiently plausible allegations.
Reference
- Full Case Name
- CRAFTY PRODUCTIONS, INC. v. The MICHAELS COMPANIES, INC.
- Status
- Published