Lontex Corp. v. Nike, Inc.
Lontex Corp. v. Nike, Inc.
Opinion of the Court
I. Introduction
In this case, Plaintiff Lontex Corporation ("Lontex") alleges that Defendant Nike, Inc. ("Nike") committed trademark infringement in violation of the Lanham Act and state law by selling athletic apparel with Lontex's registered "COOL COMPRESSION" mark without authorization. The First Amended Complaint (ECF 20, "FAC") alleges five Counts:
1. Count I : Trademark infringement under the Lanham Act,15 U.S.C. § 1114 ;
2. Count II : Trademark infringement under the Lanham Act,15 U.S.C. § 1125 (a) ;
3. Count III : Contributory trademark infringement under the Lanham Act,15 U.S.C. §§ 1114 , 1125(a) ;
4. Count IV : Trademark infringement under the common laws of California, Florida, Texas, New York, New Jersey, North Carolina, Maryland, Massachusetts, Illinois, Georgia, Colorado, Minnesota, Washington, and the District of Columbia; and
5. Count V : Statutory trademark infringement and unfair competition under the laws of Florida, California, New York, New Jersey, North Carolina, Massachusetts, Illinois, Georgia, Colorado, Minnesota, and Washington.
Presently before this Court is Nike's Partial Motion to Dismiss the counterfeiting claims in Counts I and III of the FAC under Federal Rule of Civil Procedure 12(b)(6). (ECF 23, "MTD.") Lontex's request to amend the FAC, to which Nike has objected, is also pending. In the Response in opposition to the Motion, Lontex *549argues that the Court should permit Lontex to amend the FAC. (ECF 24, "Resp." at 21-22.) At oral argument on the Motion, the Court raised the possibility of amending the FAC to remove allegations of counterfeiting in Counts I and III and add a separate claim for counterfeiting as Count VI. (ECF 32, 33.)
For the reasons discussed below, the Court reaches the following conclusions:
1. The Partial Motion to Dismiss is GRANTED, with prejudice; and
2. Lontex's request to amend the FAC is DENIED.
II. Factual Background
Taking Lontex's allegations as true, the factual background is as follows. Lontex, a Pennsylvania corporation, has been providing professional and collegiate sports teams with athletic apparel since 1989. (FAC ¶¶ 4, 10.) By 2006, Lontex was well-regarded, including amongst the National Football League, collegiate sports teams, and sports medicine doctors. (Id. ¶ 10.) As early as June 18, 2007, Lontex launched its COOL COMPRESSION line of clothing, including compression shirts, shorts, tights, and socks. (Id. ¶ 1.)
On April 22, 2008, Lontex's "COOL COMPRESSION" trademark was registered by the United States Patent and Trademark Office ("USPTO") for a variety of men's, women's, and children's clothing. (Id. Ex. A.)
On the same day, the USPTO registered Lontex's design mark, below, for the same category of clothing. (Id. )
The following year, on April 28, 2009, the USPTO registered Lontex's COOL COMPRESSION trademark for compression supports for medical use, including compression sleeves, tights, and leggings. (Id. )
Lontex has since sold millions of dollars of COOL COMPRESSION apparel and compression supports across the United States, representing over 40,000 COOL COMPRESSION goods covered by the trademarks. (Id. ¶ 17.) Lontex's COOL COMPRESSION line is popular throughout the country among customers, including professional sports teams. (Id. ¶ 10.) COOL COMPRESSION goods have been promoted through a variety of distribution channels, including direct-to-consumer websites, doctor and medical referrals, sports organizations, and speaking engagements by Lontex staff. (Id. )
Nike is an Oregon corporation with its principal place of business in Beaverton, Oregon. (Id. ¶ 5.) On or about January 2016, Lontex discovered that Nike had been selling apparel under the COOL
*550COMPRESSION trademark since at least October 2015. (Id. ¶ 19.)
Nike's COOL COMPRESSION items were placed in Nike catalogues, including baseball, basketball, football, and training catalogues. (Id. ¶ 24.) In addition to selling COOL COMPRESSION products direct-to-consumers, Nike has sold and distributed this allegedly infringing athletic apparel to its authorized distributors, resellers, and retailers, including REI, Target, Macy's Zappos, Dick's Sporting Goods, East Bay, Foot Locker, and Amazon (hereinafter, "Prohibited Intermediaries"). (Id. ¶¶ 26-27.) Nike has also monitored promotional advertising with respect to its use of COOL COMPRESSION. (Id. ¶ 26.) Neither Nike nor these Prohibited Intermediaries have authorization or approval to sell COOL COMPRESSION products. (Id. ¶¶ 28-29, 34.) Though Nike "indicated" that it would cease use of the COOL COMPRESSION mark after a "demand letter identifying the infringement of the registered COOL COMPRESSION mark was sent," Nike's catalogues and sales through the Prohibited Intermediaries continued to make use of the COOL COMPRESSION mark. (Id. ¶¶ 26, 47.)
Nike's use of the COOL COMPRESSION mark has created confusion amongst consumers by indicating that Nike is affiliated with Lontex and obtained access to Lontex's COOL COMPRESSION technology. (Id. ¶ 31.)
III. Procedural History
The original Complaint was filed in this Court on December 31, 2018, setting forth four Counts: (1) direct trademark infringement under the Lanham Act, *551
The FAC was filed on March 12, 2019 (ECF 20), rendering Nike's Partial Motion to Dismiss moot (ECF 22). On March 26, 2019, Nike filed a Partial Motion to Dismiss Counts I and III of the FAC to the extent that they assert claims for trademark counterfeiting (ECF 23). Nike does not move to dismiss Lontex's claims for trademark infringement in Counts I or III. There is also no Motion to Dismiss Counts II, IV, or V.
On April 30, 2019, following a Rule 16 pretrial conference on that date, the Court issued a scheduling order for discovery, dispositive motions, and additional pretrial and trial procedures (ECF 28, 29). On May 23, 2019, the Court held oral argument on the Partial Motion to Dismiss and discovery issues (ECF 32, 33). Following oral argument, and pursuant to the Court's orders, the parties submitted a Joint Submission regarding the Partial Motion to Dismiss (ECF 34). Attached to the submission was Lontex's Proposed Claim of counterfeiting, as well as exhibits depicting Lontex and Nike's compression products (ECF 34 Ex. 1).
IV. Legal Standard
In considering a motion to dismiss under Rule 12(b)(6), the Court "accept[s] all factual allegations as true [and] construe[s] the complaint in the light most favorable to the plaintiff." Warren Gen. Hosp. v. Amgen, Inc.,
The Court in Iqbal explained that, although a court must accept as true all of the factual allegations contained in a complaint, that requirement does not apply to legal conclusions; therefore, pleadings must include factual allegations to support the legal claims asserted. Iqbal,
V. Discussion
A. Parties' Contentions
Nike contends that Counts I and III must be dismissed to the extent that Lontex *552is claiming counterfeiting. (MTD at 2.) Nike argues that Lontex's conclusory allegations that Lontex's COOL COMPRESSION mark is "identical with, or substantially indistinguishable from" Nike's allegedly infringing COOL COMPRESSION mark is not sufficient to withstand dismissal. (Id. at 9.) Similarly, Nike contends that Lontex's allegations that Nike used the mark COOL COMPRESSION by itself as well as in direct proximity to "NIKE PRO" are conclusory. (Rep. at 8.) According to Nike, Lontex must allege that Nike placed the COOL COMPRESSION mark on products covered by Lontex's trademarks, and Lontex has failed to do so. (MTD at 4.) In other words, Nike argues that the counterfeiting allegations must be dismissed because Lontex has failed to allege that it would appear to consumers in the marketplace that Nike's COOL COMPRESSION athletic apparel was Lontex's COOL COMPRESSION apparel, as required to state a counterfeiting claim. (Rep. at 8.)
In the Response, Lontex argues that the counterfeiting claims in Counts I and III should not be dismissed because counterfeiting is a finding in a trademark infringement claim that allows for enhanced remedies, not a separate claim subject to dismissal. (Resp. at 5, 8.) Alternatively, Lontex contends that Counts I and III state plausible counterfeiting claims because the COOL COMPRESSION mark does not need to appear on Nike's compression products, nor must Nike's products be identical to Lontex's products, to establish trademark counterfeiting. (Id. at 9-12.)
B. Analysis
Count I of the FAC-direct trademark infringement under
As noted above, Nike contends that Lontex's trademark counterfeiting "claims" in Counts I and III of the FAC must be dismissed because Lontex fails to plausibly allege that Nike's COOL COMPRESSION mark is a counterfeit of Lontex's COOL COMPRESSION mark. (MTD at 10- 11.) Nike does not distinguish between the allegations in Counts I and III. Nike further contends in the Joint Submission that Lontex should not be permitted to amend the FAC to remove the word "counterfeiting" from Counts I and III and add the Proposed Claim as Count VI because Lontex cannot allege any facts to sustain a plausible counterfeiting claim. (Joint Submission at 4-6.)
i. Counterfeiting as a Distinct Claim
As an initial matter, Lontex argues that counterfeiting is not a distinct cause of action subject to dismissal because "the case law expressly taking up this issue squarely hold counterfeiting is not a separate cause of action, but rather a finding in connection with a trademark infringement *553claim...that provides for specific and additional kinds of relief." (Resp. at 7.)
Undermining Lontex's position, however, district judges in this Circuit have recognized a distinct claim for trademark counterfeiting. See, e.g., Chanel, Inc. v. Matos,
Lontex further contends that because the FAC pleads counterfeiting as a form of relief within Counts I and III, it is not an appropriate subject for dismissal under Rule 12(b)(6). (Resp. at 6.) Again, Lontex fails to cite, nor is this Court aware of, any precedential judicial decisions supporting Lontex's position. Rather, Lontex cites Jones v. Francis, No. 13-04562(SRC),
Weakening Lontex's argument, however, judges within this District, including this Court, have indicated that a request for relief may be addressed at the pleading stage. See, e.g., Am. Diabetes Ass'n v. Friskney Family Trust, LLC, No. 13-2720,
Further, at least one judge outside of the Third Circuit has dismissed a claim "to the extent that it assert[ed] a claim for trademark counterfeiting" even though the complaint was "devoid of any explicit allegations of counterfeiting" because the plaintiff sought damages under
ii. Trademark Counterfeiting in Counts I and III
Counts I and III allege trademark infringement under two theories-Count I alleges direct trademark infringement under
1. Definitions of "Counterfeit" and "Counterfeiting"
Counterfeiting is defined as "the act of producing or selling a product with a sham trademark that is an intentional and calculated reproduction of the genuine trademark." Louis Vuitton Malletier & Oakley, Inc. v. Veit,
Here, Nike does not seek to dismiss Lontex's claims of trademark infringement under §§ 1114(1)(a) or 1125(c) in Counts I and III of the FAC. Rather, Nike contends that Lontex's allegations of trademark counterfeiting must be dismissed. (See Rep. at 9) ("Lontex's pleading sounds in basic trademark infringement, not counterfeiting.") Accordingly, for purposes of this Motion, the Court need not address whether Nike committed trademark infringement under § 1114(1)(a) -the first element of a trademark counterfeiting claim. The Court limits its analysis to the issue of whether Nike's mark is a counterfeit, which is "an essential element" of a trademark counterfeiting claim. Pennzoil-Quaker State Co.,
2. Heightened Standard for Similarity
Nike contends that counterfeiting is subject to a heightened standard for similarity than ordinary trademark infringement. In other words, Nike argues that it is not sufficient for a plaintiff to allege "likelihood of confusion," the standard to determine similarity between marks in a trademark infringement claim, to state a counterfeiting claim. See AFL Phila. LLC v. Krause,
Neither party cites, nor is this Court aware of, any precedential judicial authority articulating the standard to determine whether a mark is a "counterfeit" in violation of the Lanham Act. To the Court's knowledge, only one judge in this Circuit has specifically addressed this issue. In Astrazeneca AB v. Dr. Reddy's Labs., Inc.,
In its analysis, the court cited to the Second Circuit, which has consistently recognized that a mark must be "identical with, or substantially indistinguishable from" a registered mark to be a counterfeit. See
Other circuits have also applied a heightened standard to determine whether marks are sufficiently similar to establish counterfeiting. See, e.g., Sakar Int'l, Inc. v. United States,
*557In assessing the validity of counterfeiting claims, courts consider whether a mark is "identical with, or substantially indistinguishable from" a registered mark based on "the comparison...made from the perspective of an average purchaser." Astrazeneca,
3. Application
a. The FAC Does Not State a Viable Counterfeiting Claim.
Here, Lontex first alleges that Nike's use of "NIKE PRO COOL COMPRESSION" and "PRO COOL COMPRESSION" in connection with the sale of products covered by Lontex's trademark registrations are counterfeits of Lontex's registered COOL COMPRESSION mark. (FAC ¶ 20.) However, courts have concluded that a mark that differs from a registered mark by a few letters, let alone one or two words, is not a counterfeit. See Colgate-Palmolive,
Second, Lontex alleges that "the infringing products have also been advertised, promoted and sold using the product mark COOL COMPRESSION without NIKE PRO or any other Nike house mark next to or near it." (FAC ¶ 23.) The FAC does not allege how Lontex's use of its mark appears to consumers. However, Lontex argues that the Lanham Act only requires that a word mark itself, not the product using the mark, be a counterfeit. (Resp. at 10-12.) According to Lontex, Nike's COOL COMPRESSION mark is a counterfeit of Lontex's mark because Nike used the mark in connection with sale of the same type of apparel covered by Lontex's trademark registrations. (Id. )
The cases that Lontex cites in its Response and Joint Submission, however, do not support the proposition that the context in which word marks are used is irrelevant to a court's determination of whether a mark is a counterfeit.
Lontex seeks to distinguish between design marks and the COOL COMPRESSION word mark. Lontex argues that because its word mark registrations consist of "standard characters without claim to any particular font, style, size, or color," they are "are not limited to any particular presentation." (FAC Ex. A; Resp. at 14) (quoting HealthONE of Denver, Inc. v. UnitedHealth Grp. Inc.,
Even taking the factual allegations in the FAC as true, as the Court must at this stage, the Court cannot reasonably conclude that Nike's mark is "identical with, or substantially indistinguishable from" Lontex's mark from the perspective of an average customer. In fact, Lontex alleges that it "has received reports by its professional sports team clients that the [sic] Nike's compression products are substantially inferior in performance than Lontex's products." (FAC ¶ 33.) The reasonable inference is that customers distinguished between Nike and Lontex's uses of the COOL COMPRESSION mark on compression products. (See Rep. at 9-10.)
b. Amendment of the FAC to Add the Proposed Claim Would be Futile.
As Lontex has failed to state a valid counterfeiting claim, the Court must determine whether to dismiss Lontex's counterfeiting allegations in Counts I and III with prejudice. As discussed at oral argument, the Court's determination turns on whether leave to amend would be futile. (See Oral Arg. Tr. at 16:22-19:9 (discussing how Lontex would amend the FAC if it were granted leave to amend)); Grayson v. Mayview State Hosp.,
The Proposed Claim adds allegations that Nike intentionally co-opted Lontex's mark, leaving the consuming public to believe that Lontex's COOL COMPRESSION products were produced by Nike. For example, Lontex alleges that an employee of Dick's Sporting Goods directed a customer to Nike's compression products when the customer asked where to locate "COOL COMPRESSION" products. (Proposed Claim ¶ 96.) However, Lontex does not cite, nor is this Court aware of, any precedential judicial decisions suggesting that an allegation that one individual associated a company's registered mark with another company establishes counterfeiting. Rather, the relevant inquiry is whether an "average purchaser" would view a mark to be "identical with, or substantially indistinguishable from" a registered mark "as it appears on actual merchandise." Colgate-Palmolive,
The Proposed Claim also alleges that Nike COOL COMPRESSION products appear to be "stich-for-stitch" copies of Lontex's COOL COMPRESSION products, particularly where the parties' compression garments in the same style and color are placed side-by-side. (Proposed Claim ¶ 101;
In support of Lontex's allegations that it is "impossible" for consumers to "perceive differences" between Lontex and Nike's COOL COMPRESSION products, Lontex attaches several Exhibits depicting Lontex and Nike's COOL COMPRESSION products and product descriptions. Exhibit A includes a brochure of Lontex's "SWEAT IT OUT" "COOL COMPRESSION" products as well as tags of Lontex's products bearing the "COOL COMPRESSION" mark. (Id. Ex. A.) Lontex provides three examples of Nike COOL COMPRESSION product descriptions that do not include images of Nike house marks: (1) an excerpt from a French Nike catalogue dated July 1, 2015 through March 19, 2017, bearing the words "Nike Pro" on the left hand side, and providing pictures of the "COOL COMPRESSION LONG SLEEVE TOP" in several available colors; (2) an incomplete screenshot of Macy's online store featuring a Men's "Cool Compression Shirt" without a photograph of the product or product description; and (3) an invoice dated March 3, 2016 for a purchase by Lontex from Nike.com that includes a product description of "COOL COMP[ ]SS." (Id. Ex. C.) These exhibits fail to support Lontex's allegations that *561consumers viewing Nike and Lontex's merchandise would perceive Nike's COOL COMPRESSION products to be Lontex's COOL COMPRESSION products.
Nike also includes photographs of Lontex and Nike's men's long-sleeved and sleeveless compression shirts in black, which bear the companies' respective logos. (Id. Ex. E.) As noted above, these photographs do not affect the Court's analysis of whether Nike's alleged use of Lontex's word mark amounts to counterfeiting. To conclude otherwise would permit Lontex to plausibly claim that any men's compression shirt, or any other compression product covered by Lontex's trademark registrations, is a counterfeit of Lontex's products.
In sum, neither the additional allegations included in the Proposed Claim, nor the attached Exhibits, substantiate Lontex's claim that an average consumer in the marketplace would view Nike's COOL COMPRESSION products to be "identical with, or substantially indistinguishable from" Lontex's COOL COMPRESSION products. As the Proposed Claim fails to state a plausible counterfeiting claim, the Court concludes that leave to amend the FAC to include the Proposed Claim would be futile and grants the Partial Motion to Dismiss with prejudice.
VI. Conclusion
For the foregoing reasons, Defendant's Partial Motion to Dismiss is granted. An appropriate Order follows.
The transcript of the oral argument is available at ECF 35 ("Oral Arg. Tr.").
The full list of goods covered by the trademark is provided in the FAC. (FAC ¶ 12.)
The full list of goods covered by the trademark is provided in the FAC. (FAC ¶ 13.)
The Proposed Claim alleges that "NIKE adopted by the beginning of 2016 the COOL COMPRESSION product mark for an entire line of apparel to give the appearance that Plaintiff's product had been brought in-house by Nike[.]" (Proposed Claim ¶ 99.)
In the Proposed Claim, Lontex alleges that the "cease and desist correspondence" took place in mid-2016. (Proposed Claim ¶ 100.) Lontex further alleges that Nike's infringement was willful because in 2009, Lontex was not permitted to participate in the University of Pennsylvania's Penn Relays event because of Nike's relationship with the University of Pennsylvania. (Id. ¶ 97.) Lontex alleges that this attempt to squelch Lontex's brand was not an isolated incident. (Id. ¶¶ 97-98.) Lontex alleges that its logos were "prominently displayed in televised games for many years for teams with contracts with NIKE," but over time, "the clothing labels themselves were removed or concealed" even though the players were wearing Lontex's products. (Id. ¶ 98.) However, Lontex alleges that Nike's willful conduct began in 1997, before Lontex registered its COOL COMPRESSION mark. (Id. ¶ 97.)
The Proposed Claim alleges that store visits in 2016 revealed that when a consumer asked an employee of Dick's Sporting Goods where to locate COOL COMPRESSION products, the employee directed the consumer to Nike compression products. (Proposed Claim ¶ 96.) Lontex neither identifies who conducted the store visits nor alleges that Lontex was also sold at Dick's Sporting Goods.
Nike contends that Counts IV and V seek relief under fourteen "inapplicable bodies of state law," and that Nike will respond to these Counts "in due course." (MTD at 5 n.3.)
In the Joint Submission, Lontex argues that the Court must disregard Nike's submission because it is an improper sur-reply. (Joint Submission at 2-3.) The Court considers Nike's submission in ruling on the instant Motion to the extent that it bolsters arguments previously presented to the Court in Nike's briefs.
Lontex states in the Joint Submission that it is "agreeable to the Court's proposal of potentially breaking out counterfeiting into a sixth count, should the Court be so inclined." (Joint Submission at 2.)
The Court notes that there is disagreement amongst courts outside of this Circuit about whether counterfeiting is a distinct cause of action, as the parties' briefs recognize. Compare All Star Championship Racing, Inc. v. O'Reilly Automotive Stores, Inc.,
In the Joint Submission, Lontex cites Midnight Rider, Inc. v. Forever 21, Inc., No. CV-1609298 SJOJ( ),
Though Astrazeneca involved a Motion for Partial Judgment on the Pleadings under Rule 12(c), the Third Circuit has stated that the same standard applies to Motions to Dismiss under Rule 12(b)(6). See Caprio v. Healthcare Revenue Recovery Grp., LLC,
Astrazeneca cites Montres Rolex only for the proposition that the defendant's pill could meet the counterfeit standard based on a comparison made by an average purchaser, rather than an expert. Astrazeneca,
The Court notes that district courts outside of this Circuit have applied a heightened similarity standard to determine whether a mark is a counterfeit at the pleading stage. See, e.g., Springboards to Educ., Inc. v. Scholastic Book Fairs, Inc., No. 3:17-CV-0054-B,
See, e.g., Idaho Potato Comm'n v. G&T Terminal Packaging, Inc.,
At oral argument, Lontex argued that the Court misread this allegation because Lontex is only alleging that its customers have said that Nike's "compression products in general" are inferior to Lontex's products, not that Nike "COOL COMPRESSION" products are inferior. (Oral Arg. Tr. at 24:10-19.) The Court is not persuaded by this distinction.
Because the Court concludes that Nike's COOL COMPRESSION mark is not a counterfeit, the Court need not address whether Nike intentionally used, or was willfully blind to the use of, a counterfeit mark: the second element of a counterfeiting claim. See Tovey,
Reference
- Full Case Name
- LONTEX CORPORATION v. NIKE, INC.
- Cited By
- 15 cases
- Status
- Published