Oban US, LLC v. Nautilus, Inc et al
ORDER granting 22 Motion to Dismiss as to Defendant Nautilus. Signed by Judge Janet Bond Arterton on 6/23/2014. (Morril, Gregory)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
OBAN US, LLC,
NAUTILUS, INC. and
SPORTS BEAT, INC.,
Civil No. 3:13cv1076 (JBA)
June 23, 2014
Plaintiff Oban US, LLC (“Oban”), manufacturer of a fitness heart rate monitor,
alleges that Defendant Sports Beat, Inc. (“Sports Beat”) has created an imitation product
that is a virtual copycat of the Oban monitor. Sports Beat sells its product under the
brand name “Bowflex” through a license from the Bowflex brand’s owner, Defendant
Nautilus, Inc. (“Nautilus”). Oban brings claims against both Sports Beat and Nautilus for
copyright, trademark, and trade dress infringement and unfair competition under the
Lanham Act and the statutes of unspecified states.1 Nautilus moves [Doc. # 22] to dismiss
the Amended Complaint, contending that Plaintiff has failed to plausibly state a claim of
contributory trademark infringement and vicarious copyright liability or unfair
competition arising from its licensing agreement with Sports Beat. For the reasons that
follow, Defendant Nautilus’ motion is granted and all claims against it are dismissed.
Plaintiff asserts claims of trademark infringement (Count One), unfair trade
practices and unfair competition under the Lanham Act, 15 U.S.C. 1125 § 43(a) and “the
various state unfair competition acts of the states wherein their sales have been made”
(Count Two), copyright infringement (Count Three), and trade dress infringement under
the Lanham Act (Count Four), seeking damages and injunctive relief.
Oban is the manufacturer of electronic products, including a fitness heart rate
monitor system that it markets under the trade name “60beat,” consisting of three
elements: a chest strap, a wireless receiver compatible with a smart phone, and software to
translate data from the chest strap into displayable information for the smart phone.
(Am. Compl. [Doc # 21] ¶ 4.) Oban has pending applications with the United States
Patent Office for patent protection of its product and for copyright protection for original
images and documents used in its written materials and the software used to interpret the
electrical signal from the monitor. (Id. ¶¶ 4, 7.) It already has registered the trademark
“60beat.” (Id. ¶ 5.)
Oban alleges that Defendant Sports Beat sells a heart rate monitor that is an
“imitation of, and in all material aspects and image, identical to the 60beat monitor” and
that its manual references “60beat” eight times and directs its customers to Oban’s
website for technical support. (Id. ¶ 10) Sports Beat sells its product under the brand
name “Bowflex” through a license from Defendant Nautilus, the owner of that brand. (Id.
On November 1, 2012, Oban notified Nautilus of Sports Beat’s infringement. (Id.
¶ 21.) By letter, Nautilus’ general counsel responded that until receiving this notice from
Oban, Nautilis was unaware of Sports Beat’s infringement and “had no role in the
sourcing or sale of any product by Sports Beat.” (Feb. 22, 2013 Ltr. Nautilus to Oban Ex.
8 to Am. Comp.) Nautilus further responded that it had terminated its contract with
Sports Beat as of December 31, 2012, as the earliest date the agreement could have been
terminated,2 and had directed Sports Beat to destroy all Bowflex-branded products
without any “sell-off period,” meaning that Sports Beat could not sell its inventory of
Bowflex products produced before the termination. (Feb. 22, 2013 Ltr. Nautilus to Oban
Ex. 8 to Am. Comp.; see also Am. Compl. ¶ 23.) Plaintiff contends that despite Nautilus’
representations, Sports Beat continues to sell Bowflex products and that Nautilus has
failed to respond to Plaintiff’s demands to take further action against Sports Beat. (Am.
Compl. ¶ 23.)
The Amended Complaint does not allege that Nautilus had any direct
involvement in the manufacture of the infringing Sports Beat product. Rather it alleges
that “[a]ssuming industry standards for the Nautilus’ licensing agreement with Sports
Beat, Nautilus had the right to . . . approve the product that would be using the Bowflex
brand, approve all selling materials where the Bowflex brand is used, approve all images
where the Bowflex brand is used, approve all packaging and instruction book materials
associated with the Bowflex brand and approve all trade show uses of the Bowflex brand.”
(Id. ¶ 18.) Thus, Plaintiff alleges Nautilus “knew or should have known and had an
affirmative obligation to know:” (a) “What product was being sold under its Bowflex
brand;” (b) “How the Bowflex product was being sold;” (c) “Where the Bowflex product
came from;” (d) “Whether that product belonged to another;” and (3) “That its Bowflex
brand was being use to deceive the public.” (Id. ¶ 17.)
The parties have not submitted the referenced Nautilus-Sports Beat agreement.
Trademark Infringement (Count One)
Oban claims that Nautilus is liable for contributory infringement of its trademark,
60beat, but not direct infringement. (Pl’s Opp’n [Doc. # 23] at 1.) Nautilus maintains
that its status as a licensor of its Bowflex brand to Sports Beat fails to show sufficient
control over Sports Beat to plausibly allege contributory infringement.
Under the test first established by the Supreme Court in Inwood Labs., Inc. v. Ives
Labs., Inc., 456 U.S. 844 (1982), “[t]o be liable for contributory trademark infringement, a
defendant must have (1) ‘intentionally induced’ the primary infringer to infringe, or (2)
continued to supply an infringing product to an infringer with knowledge that the
infringer is mislabeling the particular product supplied.” Kelly-Brown v. Winfrey, 717
F.3d 295, 314 (2d Cir. 2013) (quoting Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788,
807 (9th Cir. 2007)).4
To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). Detailed allegations are not required but a claim will be found facially plausible
only if “the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. However, “a
plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more
than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do. Factual allegations must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555 (alterations in original).
Plaintiff’s theory of liability differs for its copyright and trademark claims,
asserting a theory of vicarious copyright infringement and contributory trademark
infringement. Even if the theories of liability were the same for the trademark and
copyright claims, the Supreme Court has cautioned that “[g]iven the fundamental
differences between copyright law and trademark law, in [a] copyright case we do not
Oban does not discuss any distinction between claims of contributory
infringement involving a physical product and those in which an alleged contributory
infringer provides a service, or, as here, a license. “[W]ithout deciding that Inwood’s test
for contributory trademark infringement governs” in both instances, the Second Circuit
has noted that other courts have held that a plaintiff must show that a service provider or
licensor had “‘[d]irect control and monitoring of the instrumentality used by a third party
to infringe the plaintiff’s mark.’” Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93, 105 (2d Cir.
2010) (quoting Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 984 (9th
Cir. 1999)). “A number of courts in this [Circuit] have applied Inwood in the serviceprovider context” applying THE test established by the Ninth Circuit in Lockheed Martin
Corp. See Nomination Di Antonio E Paolo Gensini S.N.C. v. H.E.R. Accessories Ltd., No.
07cv6959 (DAB), 2010 WL 4968072, at *3 (S.D.N.Y. Dec. 6, 2010).
Nautilus contends that no legally viable claim against it is alleged in the Amended
Complaint, because (1) its control over its own brand as a licensor did not impose upon it
a duty to control its licensee’s use of a third-party’s trademark; (2) the Bowflex brand was
not “the instrument of infringement;” and (3) there is no allegation that Nautilus
approved any product made by Sports Beat after it became aware of the infringement.5
(Def.’s Mem. Supp. [Doc. # 22-1] at 5–6.) The Amended Complaint makes clear that
look to the standard for contributory infringement . . . which was crafted for application
in trademark cases.” Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 439
n.19 (1984). “The tests for secondary trademark infringement are even more difficult to
satisfy than those required to find secondary copyright infringement.” Perfect 10, 494
F.3d at 806.
At oral argument, Plaintiff confirmed that it does not advance a theory of
Plaintiff’s theory of contributory infringement is based on Nautilus’s ability as a licensor
of the Bowflex brand to approve the Sports Beat product using its brand (see Am. Compl.
¶ 18), which it claims Nautilus was obligated to exercise in order to avoid abandonment
under the Lanham Act, under which a mark may be canceled if the registrant “does not
control, or is not able legitimately to exercise control over, the use of such mark.” 15
U.S.C. § 1064(c).
Oban reasons that in the process of taking steps to protect its trademark against
abandonment, Nautilus “logically” must have taken steps “to know how Sports Beat was
using it” and thus “knew or should have known what product Sports Beat was selling;
where and how Sports Beat obtained that product; how it was being sold including its
instructions, etc. Nautilus knew or should have known that Sports Beat was misusing the
60beat trademark, and infringing upon Oban’s trade dress and copyright.” (Pl.’s Opp’n at
The flaw in Plaintiff’s legal theory is that Nautilus’ duty to monitor the use of its
own mark does not impose on it a duty to monitor its licensee’s infringement of a third
party’s mark. The sole consequence provided by the Lanham Act for failing to exercise
control over the use of a licensed mark is the potential loss of the rights associated with
that trademark. See 15 U.S.C. § 1064(c). Plaintiff references no case law suggesting that a
trademark owner’s failure to fulfill this requirement under the Lanham Act can impose
affirmative liability on it for infringement by its licensees. The Eleventh Circuit addressed
a similar issue regarding the interrelation of the abandonment provisions of the Lanham
Act and secondary liability for trademark infringement in Mini Maid Servs. Co. v. Maid
Brigade Sys., Inc., 967 F.2d 1516, 1520 (11th Cir. 1992), a trademark suit seeking to hold a
franchisor secondarily liable for the trademark infringement of its franchisee. The court
held that “the licensor’s duty to control a licensee’s use of the licensor’s own trademark
cannot be blindly converted into a duty to prevent a licensee’s misuse of another party’s
trademark. Such a wholesale conversion would impose responsibility upon a franchisor
not for failing to maintain the integrity of its own trademark, but for failing to prevent
another entity’s violation of the law.”6 Id. Because Plaintiff has not alleged any facts
beyond Nautilus’ status as a licensor of its mark to Sports Beat to support a theory of
contributory infringement, it has not stated a viable claim.
The duty Plaintiff alleges arising from Nautilus’ licensing contract with Sports
Beat, giving it a right to monitor Sports Beat’s use of its Bowflex trademark, is a duty
different from a duty to prevent infringement of a third-party’s mark.
trademarks were historically used to identify goods that had been manufactured by a
In Gibson Guitar Corp. v. Viacom Int’l Inc., No. 12-10870 (AJW), 2013 WL
2155309, at *4 (C.D. Cal. May 17, 2013), the district court considered and rejected a
theory of infringement very similar to that advanced by Oban in which the defendant,
Viacom, licensed its trademark for SPONGEBOB to JHS, which sold musical instruments
using the mark. The plaintiff alleged that because JHS infringed one of its marks,
Viacom, as a licensor to JHS, was liable because it had the right “to monitor and control
the quality and distribution of . . . Products containing the SPONGEBOB
SQUAREPANTS and NICKELODEON trademarks.” Id. at *1. The court held that even
if Viacom’s monitoring as a licensor provided it with actual or constructive knowledge of
infringement, “it must also have had the requisite control over the infringement in order
to be held liable for contributory infringement.” Id. at *4. Such control was lacking,
because “Viacom’s licensing of the SPONGEBOB mark to JHS is not the instrument of
infringement . . . . Viacom could bar JHS from selling the SpongeBob SquarePants Flying
V Ukulele, which would ‘have the practical effect of stopping or reducing the infringing
activity,’ but would not prevent JHS from designing and selling a Flying V Ukulele
without the SPONGEBOB mark, since the two marks are independent.” Id. at *5
(quoting Perfect 10, 494 F.3d at 807) (internal citations omitted).
particular person or business, “a number of early courts . . . conclude[d] that the owner of
a trademark could not license others to use the mark without destroying the significance
of the designation as an indication of source.”
Restatement (Third) of Unfair
Competition § 33 cmt. a (1995). This “narrow conception of trademarks as indications of
physical source was eventually replaced by a recognition that trademarks may signify
other connections between goods bearing the mark and the trademark owner, including
the trademark owner’s approval or sponsorship of the goods” and “[t]rademarks thus
came to be understood as indications of consistent and predictable quality assured
through the trademark owner’s control over the use of the designation.” Id.
Given the signal of quality conveyed by a trademark, the Lanham Act prohibits
uncontrolled or “naked” licensing in which “a trademark owner fails to exercise
reasonable control over the use of the mark by a licensee.” Id. cmt. b. “The rationale for
this requirement is that marks are treated by purchasers as an indication that the
trademark owner is associated with the product.” Kentucky Fried Chicken Corp. v.
Diversified Packaging Corp., 549 F.2d 368, 387 (5th Cir. 1977). “Customers rely upon the
owner’s reputation when they select the trademarked goods,” id., and “[t]he purpose of
the quality-control requirement is to prevent the public deception that would ensue from
variant quality standards under the same mark or dress.” Taco Cabana Int’l, Inc. v. Two
Pesos, Inc., 932 F.2d 1113, 1121 (5th Cir. 1991), aff’d 505 U.S. 763 (1992). Without this
requirement “the public [would] be deprived of its most effective protection against
misleading uses of a trademark,” Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d
358, 367 (2d Cir. 1959).
This duty, however, does not necessarily require a licensor to “ensure ‘high
quality’ goods” are being produced by its licensee.
Eva’s Bridal Ltd. v. Halanick
Enterprises, Inc., 639 F.3d 788, 790 (7th Cir. 2011). For example, “‘Kentucky Fried
Chicken’ is a valid mark though neither that chain nor any other fast-food franchise
receives a star (or even a mention) in the Guide Michelin.” Id. (internal citation omitted).
Instead, the “supervision required for [this] trademark license is the sort that produces . . .
. ‘consistent and predictable quality.’” Id. (quoting Restatement § 33 cmt. b). Thus, in
fulfilling its duty to monitor the use of its mark under the Lanham Act, Nautilus would be
focused on whether the quality of the product manufactured by Sports Beat was
consistent with other products manufactured under the Bowflex name, not whether it
infringed another company’s marks.7
Additionally, the level of monitoring that is required by a licensor varies with the
circumstances, see id. at 791 (“How much authority is enough can’t be answered
generally; the nature of the business, and customers’ expectations, both matter.”), and
“there need not be formal quality control where ‘the particular circumstances of the
licensing arrangement [indicate] that the public will not be deceived,’” Moore Bus. Forms,
Inc. v. Ryu, 960 F.2d 486, 489 (5th Cir. 1992) (quoting Taco Cabana, 932 F.2d at 1121).
Oban has not pleaded any facts to suggest the level of monitoring that Oban was required
to exercise in these circumstances nor does Oban plead any facts to show how and
whether Nautilus actually fulfilled its obligations under the Lanham Act to exercise
Notably, at oral argument, Oban acknowledged that even if Nautilus had
inspected Sport Beat’s product, it would not necessarily have known of the infringement.
What is absent from Plaintiff’s Amended Complaint is any factual allegation that
Nautilus had “direct control and monitoring” of the instrumentality of infringement, i.e.,
that it “participat[ed] in the development, promotion and sale of the counterfeit” product
manufactured by Sports Beat and did so with knowledge of the infringement.
Nomination, 2010 WL 4968072, at *4; see also Mini Maid Servs. Co., 967 F.2d at 1522
(“[W]e hold that the franchisor may be held accountable only if it intentionally induced
its franchisees to infringe another’s trademark or if it knowingly participated in a scheme
of trademark infringement carried out by its franchisees.”).
Oban has not alleged this level of involvement by Nautilus and has not pled any
facts to plausibly suggest that Nautilus was aware of the infringement before Oban’s letter
of November 1, 2012. (See Am. Comp. ¶ 21.) Nor has Oban alleged facts showing that
Nautilus supplied its mark “to one whom it knows or has reason to know is engaging in
trademark infringement.” Nomination, 2010 WL 4968072, at *9 (quoting Inwood Labs,
456 U.S. at 854). Although Oban alleges that the infringing products continued to be sold
under the Bowflex brand (see id. ¶ 23), it does not contend that this was done with
Nautilus’ knowledge or approval. See Nomination, 2010 WL 4968072, at *6 (“Plaintiffs’
allegations that the Licensor Defendants continued to supply their services after this
notice are conclusory under Iqbal. Not one of the license agreements and approval letters
annexed to the Third Amended Complaint is dated after December 2005, when Plaintiffs
notified at least some Licensor Defendants of the infringement. Nor do Plaintiffs allege
that any of the license agreements were renewed or extended after the Licensor
Defendants were notified of the infringement, or that the Licensor Defendants approved
any additional product samples after that date.”).
Because Nautilus’ trademark license for Bowflex to Sports Beat is not alleged to
confer control and responsibility for Sports Beat’s manufacture and sale of its heart
monitoring product nor authorization for continued use of its mark after knowledge of
infringement, the Amended Complaint does not plausibly allege contributory
infringement and Nautilus’ motion to dismiss is therefore granted as to Count One.
Copyright Infringement (Count Three)
As a threshold matter, Nautilus contends that Oban’s copyright infringement
claim fails because the Amended Complaint does not allege registration of Oban’s
copyright, only that its application was pending with the Copyright Office. (See Am.
Compl. ¶ 7.) The Copyright Act provides that “no civil action for infringement of the
copyright in any United States work shall be instituted until preregistration8 or
registration of the copyright claim has been made in accordance with this title.” 17 U.S.C.
§ 411(a). There is a split of authority regarding whether registration is required or
whether submitting an application to the Copyright Office suffices and the Second
Circuit has recently declined to resolve this issue. See Psihoyos v. John Wiley & Sons, Inc.,
Preregistration is distinct from submitting an application and fee to the
Copyright Office and is not applicable in this case. Preregistration was established by the
Artists’ Rights and Theft Prevention Act of 2005 and required the Copyright Registrar to
develop regulations for preregistration available for “any work that is in a class of works
that the Register determines has had a history of infringement prior to authorized
commercial distribution.” 17 U.S.C. § 408(f)(2). This “new status is not widely available
to all copyright owners” and instead is only available to “works such as movies and music
[that] can be pirated in their late production phases, before registration of the final work,”
a “concern [that] has been exacerbated by internet distribution of these pirated works.”
Rita Marie Cain, Timing Is Everything: Copyright Registration and Preregistration, 88 J.
Pat. & Trademark Off. Soc’y 381, 388 (2006); see also 2 Nimmer on Copyright
— F.3d —, 2014 WL 1327937, at *4 (2d Cir. Apr. 4, 2014) (noting that “the Federal Courts
of Appeals are divided over whether a pending application satisfies § 411(a)’s
requirement of copyright registration as a precondition to instituting an infringement
action” but holding that “[w]e need not resolve the dispute or otherwise embroil
ourselves in this circuit split”).
Some courts in this Circuit that have addressed the issue have followed the socalled registration approach and “require that a plaintiff either hold a valid copyright
registration or have applied and been refused a registration as a prerequisite to filing a
civil claim.” See Muench Photography, Inc. v. Houghton Mifflin Harcourt Pub. Co., No.
09cv2669 (LAP), 2012 WL 1021535, at *2 (S.D.N.Y. Mar. 26, 2012) (collecting district
court cases); RBC Nice Bearings, Inc. v. Peer Bearing Co., No. 3:06-CV-1380 (VLB), 2009
WL 3642769, at *4 (D. Conn. Oct. 27, 2009).
Other courts both within and outside this Circuit have rejected the “registration
approach” and instead followed the “application approach” under which a party can
bring a copyright infringement claim after an application has been submitted to the
Copyright Office and before registration is acted upon. See, e.g., Apple Barrel Prods., Inc.
v. Beard, 730 F.2d 384, 386 (5th Cir. 1984); Well-Made Toy Mfg. Corp. v. Goffa Int’l Corp.,
210 F. Supp. 2d 147, 157 (E.D.N.Y. 2002); Havens v. Time Warner, Inc., 896 F. Supp. 141,
142 (S.D.N.Y. 1995). This approach recognizes that 17 U.S.C. § 411(a) makes registration
a prerequisite to suit, but that 17 U.S.C. § 410(d) provides that the “effective date of a
copyright registration is the day on which an application, deposit, and fee, which are later
determined by the Register of Copyrights or by a court of competent jurisdiction to be
acceptable for registration, have all been received in the Copyright Office.” Since a “court
of competent jurisdiction” can adjudicate the adequacy of the submission to the
Copyright Office,” these courts have concluded that the submission of an application is
sufficient to bring suit. See 2 Nimmer on Copyright § 7.16[B][b].
Further, § 411(a) provides that even if “registration has been refused, the applicant
is entitled to institute an action for infringement.” “As the leading treatise on copyright
explains, the registration approach thus creates a strange scheme: ‘[G]iven that the
claimant . . . will ultimately be allowed to proceed regardless of how the Copyright Office
treats the application, it makes little sense to create a period of ‘legal limbo’ in which suit
is barred.” Cosmetic Ideas, Inc. v. IAC/InteractiveCorp, 606 F.3d 612, 620 (9th Cir. 2010)
(quoting 2 Nimmer on Copyright § 7.16[B][a][i] (alterations in original)).
The application approach “avoids this legal limbo—and avoids prolonging the
period of infringement—by allowing a litigant to proceed with an infringement suit as
soon as he has taken all of the necessary steps to register the copyright at issue.” Id.
These courts have concluded that the application approach “best effectuate[s] the
interests of justice and promote[s] judicial economy.” International Kitchen Exhaust
Cleaning Ass’n v. Power Washers of N. Am., 81 F. Supp. 2d 70, 72 (D.D.C. 2000). Indeed,
even some courts following the registration approach have noted that it “leads to an
inefficient and peculiar result.” See, e.g., Ryan v. Carl Corp., No. 97cv3873 (FMS), 1998
WL 320817, at *3 (N.D. Cal. June 15, 1998). As discussed below, the Court concludes that
Plaintiff has not stated a plausible copyright infringement claim, and it need not
determine whether to adopt the registration or application approach, but would be
inclined to adopt the application approach, which courts and scholars have recognized as
being more efficient and better serving the interest of justice.
No matter which approach is used, however, Plaintiff’s claim of vicarious
copyright infringement is not legally viable. Oban advances only a theory of vicarious
copyright infringement. (Pl.’s Opp’n at 4–5.) “Vicarious infringement is a concept
related to, but distinct from, contributory infringement. Whereas contributory
infringement is based on tort-law principles of enterprise liability and imputed intent,
vicarious infringement’s roots lie in the agency principles of respondeat superior.” Perfect
10, 494 F.3d at 802. To state a claim of vicarious copyright infringement, Oban must
allege that Nautilus had the “right and ability to supervise” the infringing conduct and a
direct financial interest in the infringing activity. Softel, Inc. v. Dragon Med. & Scientific
Commc’ns, Inc., 118 F.3d 955, 971 (2d Cir. 1997) (quoting Shapiro, Bernstein & Co. v.
H.L. Green Co., 316 F.2d 304, 307 (2d Cir. 1963) (affirming dismissal of vicarious
copyright infringement claim where “[t]he only evidence . . . of [the defendant’s]
supervisory capacities and financial interests was that [the defendant] was the president
of [infringing company] and a shareholder”).
Oban contends that “Nautilus benefited from the Bowflex license both directly”
and indirectly “as a means to extend [its] brand awareness” and “had the power to
exercise a right to stop Sports Beat from infringing.” (Pl.’s Opp’n at 5.) However, as
discussed above, even if the licensing relationship between Nautilus and Sports Beat gave
Nautilus the right and ability to control its mark, this relationship is not akin to agent and
principal and does not imply that Nautilus was necessarily “profiting from direct
infringement while declining to exercise a right to stop or limit it.” Metro-GoldwynMayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005) (citing Shapiro, Bernstein &
Co., 316 F.2d at 307)).
By contrast, in Shapiro, Bernstein & Co., the defendant department store was
found vicariously liable for the directly infringing sales of pirated records manufactured
and sold by its retailing concessionaire where it received a proportionate share of the
gross proceeds of all sales and had the “unreviewable discretion” to discharge the
infringer’s employees for not following its rules and policies. 316 F.2d at 308. The
Second Circuit concluded that the department store’s “relationship to its infringing
licensee, as well as its strong concern for the financial success of the phonograph record
concession, renders it liable for the unauthorized sales of the ‘bootleg’ records.” Id.
Because the department store “retained the ultimate right of supervision over the conduct
of the record concession and its employees,” the relationship between the parties was akin
to employer-employee and vicarious infringement liability applied. Id.
In Perfect 10, the Ninth Circuit held that credit card companies were not
vicariously liable for processing payments on websites selling infringing photographs,
although the credit card companies’ rules and regulations permitted them to require
member merchants to cease illegal activity and they could have refused to process
payments on this basis, which would have had “some indirect effect on the infringing
activity.” Perfect 10, 494 F.3d at 805. In order for “vicarious liability to attach, however,
the defendant must have the right and ability to supervise and control the infringement,
not just affect it.” Id. (emphasis in original). Likewise, here Nautilus had the ability to
revoke Sports Beat’s right to use the Bowflex brand name but there is no allegation that it
could have prevented Sports Beat from creating a product and associated materials that
were an imitation of “60beat” or that without the Bowflex label Sports Beat would not
have been able to sell the same monitor. Under its licensing agreement, Nautilus could
prevent the Bowflex name from being attached to this imitation product, but that has
only an indirect impact on Sports Beat’s conduct and does not imply an ability to
supervisor and control the actual infringement. Accordingly, Nautilus’ motion to dismiss
is granted as to Count Three.
Trade Dress Infringement (Count Four)
The Lanham Act “extends protection to a product’s ‘trade dress’—the total image
of a good as defined by its overall composition and design, including size, shape, color,
texture, and graphics.” Coach Leatherware Co., Inc. v. AnnTaylor, Inc., 933 F.2d 162, 168
(2d Cir. 1991). “To plead a claim of trade dress infringement involving the appearance of
a product, [a plaintiff] must allege that (1) the claimed trade dress is non-functional; (2)
the claimed trade dress has secondary meaning; and (3) there is a likelihood of confusion
between the plaintiff’s good and the defendant’s.” Sherwood 48 Associates v. Sony Corp. of
Am., 76 F. App’x 389, 391 (2d Cir. 2003).
Oban alleges that Sports Beat has intentionally misused its trade dress by using
“images from the Plaintiff’s product in marketing its copycat product” and that Nautilus
has allowed such use. (Am. Compl. ¶¶ 33–35.) Even if Plaintiff could establish that
Nautilus was indirectly liable for this infringement, it has failed to offer any description of
the asserted trade dress, only attaching to the Amended Complaint images of the
respective products. Oban declined to articulate the elements of its trade dress claim,
explaining that “[r]ather than trying to verbally describe the similarities,” it “attached
pictures which show how much the Bowflex product matched the 60beat product. What
could be more specific?” (Pl.’s Opp’n at 6.)
The answer to Plaintiff’s question is that this approach fails as overbroad.
Landscape Forms, Inc. v. Columbia Cascade Co., 113 F.3d 373, 380 (2d Cir. 1997). The
Second Circuit has “exercised particular caution when extending protection to product
designs” out of concern that “granting trade dress protection to an ordinary product
design would create a monopoly in the goods themselves.” Id. (internal quotation marks
omitted). Thus, “the party seeking protection must . . . be able to point to the elements
and features that distinguish its trade dress” and “[t]he identification of design elements
that compose the asserted trade dress will thus assist in winnowing out claims that are
overbroad as a matter of law,” Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 117 (2d Cir.
2001), because “[w]ithout such a precise expression of the character and scope of the
claimed trade dress, litigation will be difficult, as courts will be unable to evaluate how
unique and unexpected the design elements are in the relevant market. Courts will also
be unable to shape narrowly-tailored relief if they do not know what distinctive
combination of ingredients deserves protection.
Moreover, a plaintiff’s inability to
explain to a court exactly which aspects of its product design(s) merit protection may
indicate that its claim is pitched at an improper level of generality, i.e., the claimant seeks
protection for an unprotectable style, theme or idea.” Landscape Forms, Inc.., 113 F.3d at
381; see also Yurman Design, Inc., 262 F.3d at 117 (“[W]ithout a specification of the
design features that compose the trade dress, different jurors viewing the same line of
products may conceive the trade dress in terms of different elements and features, so that
the verdict may be based on inconsistent findings.”).
Thus, “the mere attachment of brochures [and] photographs . . . to the Amended
Complaint” is not sufficient, “as courts cannot be expected to distill from a set of images
those elements that are common to a line of products and both distinctive and nonfunctional.” Nat’l Lighting Co., Inc. v. Bridge Metal Indus., LLC, 601 F. Supp. 2d 556, 562–
63 (S.D.N.Y. 2009).
Given that Oban has failed to plausibly allege a trade dress
infringement claim, Nautilus’ motion to dismiss is granted as to Count Four.
Unfair Competition (Count Two)
Oban only perfunctorily addresses its claim for unfair competition under the
Lanham Act and unspecified states’ statutes, contending that “Sports Beat (and by
extension Bowflex/Nautilus . . .) copied Oban’s product without authorization, infringed
Oban’s trademark, copyright and trade dress,” and the “public has been deceived.” (Pl.’s
Opp’n at 6.) To the extent that Plaintiff asserts a separate claim in Count Two for unfair
competition under Section 43(a) the Lanham Act, it is dismissed for the reasons discussed
above regarding Plaintiff’s trademark infringement claims. Section 43(a) prohibits the
“use in commerce” of “any word, term, name, symbol, or device, or any combination
thereof, or any false designation of origin, false or misleading description of fact, or false
or misleading representation of fact.” 15 U.S.C. § 1125(a). “As the Second Circuit
accurately observed . . . 43(a) ‘does not have boundless application as a remedy for unfair
trade practices,’” Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 29
(2003) (quoting Alfred Dunhill, Ltd. v. Interstate Cigar Co., 499 F.2d 232, 237 (2d Cir.
1974)), and “‘because of its inherently limited wording, § 43(a) can never be a federal
codification of the overall law of unfair competition’ but can apply only to certain unfair
trade practices prohibited by its text,” id. (quoting 4 J. McCarthy, Trademarks and Unfair
Competition § 27:7 (4th ed. 2002)).
Plaintiff must allege grounds for attributing Sports Beats’ infringing “use” of
Oban’s trademark to Nautilus, see Am. Tel. & Tel. Co. v. Winback & Conserve Program,
Inc., 42 F.3d 1421, 1433 (3d Cir. 1994) (“In construing the [Lanham] Act . . . courts
routinely have recognized the propriety of examining basic tort liability concepts to
determine the scope of liability.”), but has not alleged anything more than Nautilus’
duties and authority as a licensor which cannot establish liability, see Display Producers,
Inc. v. Shulton, Inc., 525 F. Supp. 631, 633 (S.D.N.Y. 1981) (“The mere allegation that
Shulton provided Ledan with the opportunity to engage in wrongful conduct [by
providing it with a product] does not, without more, state a claim for contributory
infringement under the Lanham Act.”); see also Optimum Technologies, Inc. v. Henkel
Consumer Adhesives, Inc., 496 F.3d 1231, 1243 (11th Cir. 2007) (“[T]here is no evidence
that HCA itself ‘misused’ the Lok–Lift mark, that is, that it ‘placed’ the Lok–Lift mark on
‘goods’ or ‘displays’ at the level of the retail stores.”).
As for Plaintiff’s unfair competition claim asserted under “the various state unfair
competition acts,” in the absence of any other state statute identified, the Court will
assume that Plaintiff has asserted a claim under the Connecticut Unfair Trade Practices
Act (“CUTPA”). Like Plaintiff’s Lanham Act unfair competition claim, its CUTPA claim
is based on Sports Beat’s copying of its “product without authorization” and infringement
of Oban’s trademark and copyright; Nautilus is alleged to be responsible for this conduct
only “by extension.” (Pl.’s Opp’n at 6; see also Am. Compl. ¶ 28.) As discussed above,
however, there is no basis for attributing such conduct to Nautilus and as a result,
Plaintiff’s CUTPA claim is dismissed as well.
For the reasons set forth above, Defendant Nautilus’ Motion [Doc. # 22] to
Dismiss is GRANTED. The Clerk is directed to dismiss Defendant Nautilus from this
IT IS SO ORDERED.
Janet Bond Arterton, U.S.D.J.
Dated at New Haven, Connecticut this 23rd day of June, 2014.
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