Hibbett Sporting Goods Inc et al v. Sock & Accesory Brands Global Inc et al

Filing 24

MEMORANDUM OPINION. Signed by Judge R David Proctor on 1/29/2018. (KAM)

FILED
2018 Jan-29 PM 04:05
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
HIBBETT SPORTING GOODS, INC., et
al.,
Plaintiffs,
v.
SOCK & ACCESSORY BRANDS
GLOBAL, INC., et al.,

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Case No.: 2:17-cv-01029-RDP

Defendants.

MEMORANDUM OPINION
This matter is before the court on Defendant Shoebacca, Ltd.’s Motion to Dismiss. (Doc.
# 17). Plaintiffs have responded to the Motion. (Doc. # 21).
I.

Background
Plaintiffs Hibbett Sporting Goods, Inc. and Hibbett Holdings, LLC own and/or license

certain federal trademarks. (Doc. # 1 at 6). Former Defendant Sock and Accessory Brands
Global, Inc. (“SABG”)1 is a hosiery and accessories design, product development, and
distribution company. (Doc. # 1 at 8). In 2011, SABG agreed to manufacture certain basketball
crew socks (“the Infringing Socks”) for Plaintiff. The Infringing Socks include the Hibbett
Marks printed on descriptive tags attached to the front and back and woven into interior of the
garments. The Socks also include a ® mark next to the Hibbett Marks. (Doc. # 1 at 8). SABG
had agreed to Hibbett Wholesale Inc.’s Vendor Compliance Manual, which provides that:
“Vendor may not resell any Goods, including cancelled product, overstocks, overruns,
defectives, and irregulars, which incorporate Hibbett's intellectual property, labels or marks
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On November 13, 2017, Plaintiffs filed a Notice of Voluntary Pro Tanto Dismissal of SABG. (Doc. # 22).
That same day, Plaintiffs’ claims against SABG were dismissed. (Doc. # 23).

without (i) prior written approval of Hibbett and (ii) removal of all such intellectual property,
marks and labels.” (Doc. # 1 at 8).
After SABG completed production of the Infringing Socks, Hibbett Sporting Goods
decided against selling the sock. Hibbett cancelled the order and returned all the Infringing Socks
to SABG, receiving credit for the order. (Doc. # 1 at 8). Hibbett and SABG entered into an
agreement authorizing SABG to offer the unsold stock of the Infringing Socks exclusively to
accounts for non-domestic distribution. (Doc. # 1 at 9).
In or around August 2013, SABG requested authorization from Hibbett to sell its
remaining unsold stock of the Infringing Socks domestically. (Doc. # 1 at 9). On September 12,
2013, Hibbett informed SABG by e-mail that it was not authorized to sell the Infringing Sock
domestically. (Doc. # 1 at 9). Despite Hibbett denying authorization for domestic sales, SABG
sold the Infringing Socks to multiple domestic retailers including, but not limited to, K-Mart and
Defendant Shoebacca Ltd. (Doc. # 1 at 9). SABG did not remove the Hibbett Marks from the
Infringing Socks prior to making the unauthorized domestic sales. (Doc. # 1 at 10).
Shoebacca is a discount shoe, apparel, and accessories retailer. (Doc. # 1 at 8). Plaintiff
alleges that Shoebacca has sold the Infringing Socks, including domestically, through its online
retail services. (Doc. # 1 at 10).
II.

Standard of Review
The Federal Rules of Civil Procedure require only that the complaint provide “a short and

plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). However, the complaint must include enough facts “to raise a right to relief above the
speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Pleadings that
contain nothing more than “a formulaic recitation of the elements of a cause of action” do not

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meet Rule 8 standards, nor do pleadings suffice that are based merely upon “labels and
conclusions” or “naked assertion[s]” without supporting factual allegations. Twombly, 550 U.S.
at 555, 557. In deciding a Rule 12(b)(6) motion to dismiss, courts view the allegations in a
complaint in the light most favorable to the non-moving party. Watts v. Fla. Intl. Univ., 495 F.3d
1289, 1295 (11th Cir. 2007).
To survive a motion to dismiss, a complaint must “state a claim to relief that is plausible
on its face.” Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Although “[t]he
plausibility standard is not akin to a >probability requirement,’” the complaint must demonstrate
“more than a sheer possibility that a defendant has acted unlawfully.” Id. A plausible claim for
relief requires “enough fact[s] to raise a reasonable expectation that discovery will reveal
evidence” to support the claim. Twombly, 550 U.S. at 556.
In considering a motion to dismiss, a court should “1) eliminate any allegations in the
complaint that are merely legal conclusions; and 2) where there are well-pleaded factual
allegations, ‘assume their veracity and then determine whether they plausibly give rise to an
entitlement to relief.’” Kivisto v. Miller, Canfield, Paddock & Stone, PLC, 413 Fed. Appx. 136,
138 (11th Cir. 2011) (quoting Am. Dental Assn. v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir.
2010)). That task is context specific and, to survive the motion, the allegations must permit the
court based on its “judicial experience and common sense . . . to infer more than the mere
possibility of misconduct.” Twombly, 550 U.S. at 556. Further, “courts may infer from the
factual allegations in the complaint ‘obvious alternative explanation[s],’ which suggest lawful
conduct rather than the unlawful conduct the plaintiff would ask the court to infer.” Am. Dental,

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605 F.3d at 1290 (quoting Iqbal, 556 U.S. at 682). If the court determines that well-pleaded
facts, accepted as true, do not state a claim that is plausible, the claims are due to be dismissed.
Twombly, 550 U.S. at 556.
III.

Analysis
Plaintiff’s Complaint contains the following claims against Shoebacca: (1) Count One -

Federal Trademark Infringement in Violation of 15 U.S.C. § 1114(1); (2) Count Two - Common
Law Trademark Infringement; (3) Count Three - Trademark Dilution Pursuant to 15 U.S.C. §
1125(c); (4) Count Four - Trademark Dilution Pursuant to Ala. Code § 8-12-17; (5) Count Five Unfair Competition in Violation of 15 U.S.C. § 1125(a)(1); and (6) Count Six - Common Law
Unfair Competition. (Doc. # 1).
In support of its Motion to Dismiss, Shoebacca makes the following arguments: (1) that
Plaintiffs’ claims are barred as a matter of law because trademark law does not reach the sale of
genuine goods bearing a true mark, even if such sale is without the mark owner’s consent; and
(2) Plaintiffs’ rejection of the Infringing Socks for a credit constitutes a “sale” back to SABG
which bars Plaintiffs’ claims under the First Sale Doctrine.2 (Doc. # 17).
Plaintiff responds that (1) the Infringing Socks were not genuine goods because SABG’s
sale of the socks was not authorized, and (2) that Plaintiffs’ return of the Socks to SABG was not
a “sale,” and therefore the First Sale Doctrine is inapplicable. (Doc. # 21).
A.

The Complaint Sufficiently Alleges that the Infringing Socks Are Not
Genuine Goods

First, Shoebacca argues that there is no violation of the Lanham Act because the
Infringing Socks are “genuine.” “It is true that the unauthorized sale of a genuine trademarked
product does not in itself constitute trademark infringement.” Caterpillar, Inc. v. Nationwide
2

Defendant makes these arguments with regard to Plaintiffs’ Lanham Act claims, and then proceeds to
argue that the same considerations bar Plaintiffs’ state law claims. (Doc. # 1 at 9).

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Equip., 877 F. Supp. 611, 615 (M.D. Fla. 1994) (citing Shell Oil Co. v. Commercial Petroleum,
Inc., 928 F.2d 104 (4th Cir. 1991); NEC Electronics v. CAL Circuit Abco, 810 F.2d 1506 (9th
Cir.), cert. denied, 484 U.S. 851 (1987); Babbit Electronics v. Dynascan Corp., 828 F.Supp. 944,
956 (S.D.Fla. 1993). “However, ‘identical goods sold in an unauthorized manner are not genuine
for purposes of the Lanham Act.’” Caterpillar, 877 F. Supp. at 615 (quoting H.L. Hayden Co. of
New York, Inc. v. Siemens Medical Systems, Inc., 879 F.2d 1005, 1023 (2d Cir. 1989)). And,
goods manufactured by agreement with the holder of a trademark, but distributed without the
holder’s authorization, are not considered genuine for purposes of trademark protection. El
Greco Leather Products Co., Inc. v. Shoe World, Inc., 806 F.2d 392 (2d Cir. 1986), cert. denied,
484 U.S. 817 (1987).
The Complaint alleges that Plaintiffs ordered, but then “decided against selling the sock.”
(Doc. # 1 at 8). Under Plaintiffs’ Purchase Agreement and Vendor Compliance Manual, SABG
was permitted to resell the rejected socks if it first “(i) [obtained] prior written approval of
Hibbett and (ii) remov[ed] all . . . intellectual property, marks and labels.” (Doc. # 1 at ¶ 30). The
Complaint alleges that Plaintiffs gave written permission to sell the socks to accounts for nondomestic distribution. (Doc. # 1 at 9). SABG later requested permission to distribute
domestically, but that request was denied. (Doc. # 1 at 9). The Infringing Socks were then sold
domestically without authorization, and without removal of Plaintiffs’ marks. Because the
Complaint alleges that the Infringing Socks were sold in an unauthorized manner, it plausibly
states a claim that the Infringing Socks are not genuine, and therefore Plaintiffs’ claims are not
barred as constituting a resale of genuine goods.

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B.

The Court Cannot Say as a Matter of Law that Plaintiffs’ Return of the
Socks to SABG Was a First Sale

Second, Shoebacca argues that Plaintiffs’ claims are barred by the First Sale Doctrine.
(Doc. # 17 at 9). “The resale of genuine trademarked goods generally does not constitute
[trademark] infringement.” Davidoff & CIE, S.A. v. PLD Int’l Corp., 263 F.3d 1297, 1301 (11th
Cir. 2001) (emphasis added) (citing Matrix Essentials, Inc. v. Emporium Drug Mart, Inc., 988
F.2d 587, 590 (5th Cir. 1993); NEC Electronics v. CAL Circuit Abco, 810 F.2d 1506, 1509 (9th
Cir. 1987)). “Under what has sometimes been called the ‘first sale’ or ‘exhaustion doctrine’, the
trademark protections of the Lanham Act are exhausted after the trademark owner’s first
authorized sale of that product.” Davidoff & CIE, 263 F.3d at 1301–02 (citing Iberia Foods
Corp. v. Romeo, 150 F.3d 298, 301 n. 4 (3d Cir. 1998); Enesco Corp. v. Price/Costco Inc., 146
F.3d 1083, 1085; Allison v. Vintage Sports Plaques, 136 F.3d 1443, 1447-48 (11th Cir. 1998)).
Defendant argues that Plaintiffs’ trademark protections under the Lanham Act were
exhausted because the sale back to SABG constitutes the first “sale” of the Infringing Socks.
(Doc. # 17 at 9). But, this argument is based on a tortured reading of Plaintiffs’ Complaint.
Rather than a “sale” to SABG, the Complaint alleges that “Hibbett Sporting Goods decided
against selling the sock [and] cancelled the order and returned all the Infringing Socks to SABG,
receiving credit for the order.” (Doc. # 1 at 8). The return and decision not to sell the Socks is not
analogous to an authorized first sale of genuine trademarked goods. Interestingly, Defendant has
not provided the court with any legal authority supporting the conclusion that a return constitutes
a first sale under the Lanham Act. The court simply cannot conclude that, as a matter of law, the
“return” at issue here constitutes a “sale” under the first sale doctrine.

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IV.

Conclusion
The claims in Plaintiffs’ Complaint are plausibly pled and supported by sufficient factual

content that allows the court to draw the reasonable inference that Shoebacca may be liable for
the misconduct alleged. See Iqbal, 556 U.S. at 678. Therefore, Shoebacca’s Motion to Dismiss
(Doc. # 17) is due to be denied.
DONE and ORDERED this January 29, 2018.

_________________________________
R. DAVID PROCTOR
UNITED STATES DISTRICT JUDGE

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