Treasury Management Services, Inc. v. Wall Street Systems Delaware, Inc. et al

Filing 16

MEMORANDUM. Signed by Judge Sue L. Robinson on 5/5/2017. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

TREASURY MANAGEMENT
SERVICES, INC.

)
)
)

Plaintiff,

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)

) Civ. No. 16-283-SLR

v.

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WALL STREET SYSTEMS DELAWARE,
INC. and IT2 TREASURY SOLUTIONS,
INC.

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)
)

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Defendants.

)

MEMORANDUM
At Wilmington this

~day of May,

2017, having reviewed the papers submitted

in connection with defendants' motion to dismiss (D.I. 8), the court issues its decision as
follows:
1. Background. Treasury Management Services, Inc. ("plaintiff') is a Texas
corporation with a principal place of business in Houston, Texas. (D.I. 1 at~ 3) Plaintiff
is an investment fund manager and administrator. (D. I 1, ex. C) Wall Street Systems
Delaware, Inc. ("WSS") and IT2 Treasury Solutions ("IT2") (collectively, "defendants")
are Delaware corporations with a principal place of business in New York City, New
York. (D.I. 1 at~~ 5-6) WSS develops "treasury management software systems ... to
help automate the administration of corporate treasury departments." (D.I. 9 at 3) IT2
is a subsidiary of WSS and develops electronic treasury management systems. (D.I. 1,
ex. D & E)
2. On April 20, 2016, plaintiff filed an action against defendants, alleging that
defendants: (1) infringed on a registered trademark in violation of 15 U.S.C.

§ 1114(1)(a); (2) falsely designated its products and services as originating from,

connected with, or endorsed by plaintiff in violation of 15 U.S.C. § 1125(a); (3) diluted its
trademark in violation of 15 U.S.C. § 1125(c); (4) diluted its trademark in violation of 6
Del. C. § 3313; (5) engaged in unfair competition in violation of 6 Del. C. § 2531; and (6)
infringed on its trademark and engaged in unfair competition in violation of Delaware
common law. (D.I. 1) Plaintiff also seeks to recover attorney:, fees. (D.I. 1 at~ 53)
Defendants have moved to dismiss for failure to state a claim for relief under Federal
Rules of Civil Procedure 12(b)(6). (D.I. 8) The court has jurisdiction pursuant to 15
U.S.C. § 1121 (a) and 28 U.S.C. §§ 1331, 1338, and 1367
3. TMS. Plaintiff began using the mark "TMS" in January 1993. (D.I. 1 at~ 15)
On May 30, 2006, plaintiff applied to the United States Patent and Trademark Office
("USPTO") for the trademark "TMS." USPTO TSDR Case Viewer #78896326,
Document 14 "TEAS Plus New Application" (May 30, 2006). The mark was published
for opposition on December 13, 2006. Id., Document 11 "Notice of Publication" (Dec.
13, 2006). On May 20, 2007, "TMS" was issued on the Principal Register in
international class 036 for "currency exchange and advice; electronic transfer of money;
equity capital investment; financial forecasting; financial information in the nature of
rates of exchange; foreign exchange information services; investment advice;
investment management; monetary exchange." (D.I. 1, ex. A) The "TMS" "mark
consists of standard characters without claim to any particular font, style, size, or color."
(Id.)

4. TMS TRADE. Plaintiff began using the mark "TMS TRADE" in January 1993.
(D.I. 1 at~ 15) On May 30, 2006, plaintiff applied to the USPTO for the trademark "TMS
TRADE." USPTO TSDR Case Viewer #78896257, Document 16 "TEAS Plus New
Application" (May 30, 2006). The mark was published for opposition on January 3,
2007. Id., Document 11 "Notice of Publication" (Jan. 3, 2007). On April 10, 2007, "TMS
TRADE" was issued on the Principal Register in international class 036 for "currency

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exchange and advice; electronic transfer of money; equity capital investment; financial
forecasting; financial information in the nature of rates of exchange; foreign exchange
information services; investment advice; investment management; monetary exchange."
(D.I. 1, ex. 8) The ''TMS TRADE" "mark consists of standard characters without claim
to any particular font, style, size, or color." (Id.)

5. Plaintiff's Use. Plaintiff has used the marks "TMS" and "TMS TRADE"
(collectively, "TMS Marks") "substantially, continuously, and extensively in U.S.
commerce since at least January 1993." (D.I. 1 at 1115) Plaintiff uses the TMS Marks
for its "on-line services, point-of-sale services and ecommerce." (Id. at 1118) The TMS
Marks appear prominently on plaintiff's website. (Id., ex. C) On August 23, 2013,
plaintiff "filed Combined Declarations of Use and Incontestability under Sections 8 & 15"
for the TMS Marks, and on September 10, 2013, the USPTO "issued Notices of
Acceptance and Acknowledgement" for the TMS Marks. 1 (Id. at 1116)
6. WSS and IT2's use. Plaintiff alleges that defendants have used and continue
to use "the TMS Marks in connection with their financial, investment, and monetary
services." (D.I. 1 at 1119) The WSS website describes "The IT2 TMS" which is a "Fully
Integrated TMS." (D.I. 1, ex. D at 2) The IT2 website (http://www.it2tms.com) states
that "IT2 has been at the forefront of the development of the Treasury Management
System (TMS) since the beginning" and employs the "TMS" acronym extensively. (D.I.
1, ex. Eat 2) According to plaintiff, as early as October 2014, "[d]efendants had
knowledge of the TMS Marks" and, despite this knowledge, they continued "to willfully
infringe on the TMS Marks." (Id. at 111120-21) Plaintiff alleges that defendants "allow[] ..
. customers and clients to log-into [their] system and use [their] financial services
related to the infringing TMS Marks regardless of the customer or client's location." (Id.

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The TMS Marks, therefore, are incontestable under 15 U.S.C. § 1065.

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at 1122 (emphasis added)) Further, plaintiff contends that "customers or clients of
[d]efendants have utilized [d]efendants' financial services related to the infringing TMS
Marks." (Id. at 1123 (emphasis added))

7. Standard of Review. A motion filed under Federal Rule of Civil Procedure
12(b)(6) tests the sufficiency of a complaint's factual allegations. Bell At/. Corp. v.
Twombly, 550 U.S. 544, 555 (2007); Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.

1993). A complaint must contain "a short and plain statement of the claim showing that
the pleader is entitled to relief, in order to give the defendant fair notice of what the ...
claim is and the grounds upon which it rests." Twombly, 550 U.S. at 545 (internal
quotation marks omitted) (interpreting Fed. R. Civ. P. 8(a)). Consistent with the
Supreme Court's rulings in Twombly and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the
Third Circuit requires a three-part analysis when reviewing a Rule 12(b)(6) motion.
Connelly v. Lane Const. Corp., 809 F.3d 780, 787 (3d. Cir. 2016). In the first step, the

court "must tak[e] note of the elements a plaintiff must plead to state a claim." Next, the
court "should identify allegations that, because they are no more than conclusions, are
not entitled to the assumption of truth." Lastly, "[w]hen there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement for relief." Id. (citations omitted).
8. Under Twombly and Iqbal, the complaint must sufficiently show that the
pleader has a plausible claim. McDermott v. Clondalkin Grp., 2016 WL 2893844, at *3
(3d Cir. May 18, 2016). Although "an exposition of [the] legal argument" is
unnecessary, Skinner v. Switzer, 562 U.S. 521 (2011 ), a complaint should provide
reasonable notice under the circumstances. Id. at 530. A filed pleading must be "to the
best of the person's knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances," such that "the factual contents have evidentiary
support, or if so identified, will likely have evidentiary support after a reasonable

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opportunity for further investigation or discovery." Anderson v. Bd. of Sch. Directors of
Millcreek Twp. Sch. Dist., 574 F. App'x 169, 174 (3d Cir. 2014) (quoting Fed. R. Civ. P.

11 (b)). So long as plaintiffs do not use "boilerplate and conclusory allegations" and
"accompany their legal theory with factual allegations that make their theoretically viable
claim plausible," the Third Circuit has held "pleading upon information and belief [to be]
permissible where it can be shown that the requisite factual information is peculiarly
within the defendant's knowledge or control." McDermott, 2016 WL 2893844, at *4
(quotation marks, citation, and emphasis omitted).
9. As part of the analysis, a court must accept all well-pleaded factual allegations
in the complaint as true, and view them in the light most favorable to the plaintiff. See
Erickson v. Pardus, 551 U.S. 89, 94 (2007); Christopher v. Harbury, 536 U.S. 403, 406

(2002); Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). In this regard, a
court may consider the pleadings, public record, orders, exhibits attached to the
complaint, and documents incorporated into the complaint by reference. Tellabs, Inc. v.
Makar Issues & Rights, Ltd., 551 U.S. 308, 322 (2007); Oshiver v. Levin, Fishbein,
Sedran & Berman, 38 F.3d 1380, 1384-85 n.2 (3d Cir. 1994). The court's analysis is a

context-specific task requiring the court "to draw on its judicial experience and common
sense." Iqbal, 556 U.S. at 663-64.
10. Lanham Act,§ 32. Plaintiff alleges trademark infringement under 15 U.S.C.

§ 1114(1)(a). (D.I. 1 at ,.m 24-28) In order to establish federal trademark infringement,
a plaintiff must demonstrate that: (1) the mark is valid and legally protectable; (2)
plaintiff owns the mark; and (3) the defendant's use of its mark to identify goods or
services is likely to create confusion concerning the origin of the goods or services.
Checkpoint Sys. v. Check Point Software Tech., 269 F.3d 270, 279 (3d Cir. 2001). "If

the mark at issue [i]s federally registered and ha[s] become incontestable, ... validity,
legal protectability, and ownership are proved." Ford Motor Co. v. Summit Motor Prod.,

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Inc., 930 F.2d 277, 291 (3d Cir. 1991) (citation omitted). A mark is incontestable if it has

been "in continuous use for five years subsequent to the date of ... registration and is
still in use in commerce." 15 U.S.C. § 1065. "Where a mark has not been federally
registered or has not achieved incontestability, validity depends on proof of secondary
meaning, unless the unregistered or contestable mark is inherently distinctive." Ford
Motor, 930 F.2d at 291. To determine likelihood of confusion, courts in the Third Circuit

employ "the Lapp factors." 2 However, "[i]f products are directly competing, and the
marks are clearly very similar, a district judge should feel free to consider only the
similarity of the marks themselves." A&H Sportswear, Inc. v. Victoria's Secret Stores,
Inc., 237 F.3d 198, 214 (3d Cir. 2000).

11. The TMS Marks are incontestable, therefore, plaintiff has alleged facts
sufficient to support validity, protectability, and ownership. Ford Motor, 930 F.2d at 291.
As to likelihood of confusion, plaintiff alleges that:
Defendants' use of the TMS Marks in marketing, promotion, retail software
sales, and financial services in the financial services industry is likely to
cause confusion, mistake, or deception as to the source, affiliation,
sponsorship, or authenticity of defendants' services. As a result of
defendants' unauthorized use of trademarks that are confusingly similar to
plaintiff's federally registered marks, the public is likely to believe that
plaintiff is affiliated with defendants.
(D.I. 1 at~ 25) In support, plaintiff contends that "defendants' website allows its
customers and clients to log-in to defendants' system and use defendants' financial
services related to the infringing TMS Marks regardless of the customer or client's
location." (D.I. 1 at~ 22) The TMS Marks relate to services, and plaintiff has pied that
defendants offer access to their "TMS" products as a service on a website. These facts

2

Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cir. 1983).

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are sufficient to support a likelihood of confusion as to services related to the TMS
Marks. Therefore, defendants' motion is denied with respect to count 1. 3
12. Lanham Act,§ 43(a). Plaintiff alleges that defendants' "use of the TMS
Marks constitutes a false designation of origin, or a false representation or of false
advertising" under§ 43(a) of the Lanham Act. (D.I. 1 at

,.m 29-33)

Third Circuit courts

"measure federal trademark infringement, 15 U.S.C. § 1114, and federal unfair
competition, 15 U.S.C. § 1125(a)(1 )(A), by identical standards." A&H Sportswear, Inc.,
237 F.3d at 210. Therefore, for the reasons cited above with respect to plaintiff's§ 32
claims, defendants' motion as to the§ 43(a) claims is denied. 4
13. Lanham Act,§ 43(c) dilution. Plaintiff contends that defendants' actions
constitutes trademark dilution under§ 43(c) of the Lanham Act. The relevant statute
provides injunctive relief to "the owner of a famous mark that is distinctive, inherently or
through acquired distinctiveness." U.S.C. § 1125(c)(1 ). In order to establish a federal
dilution claim, a plaintiff must show:
(1) the plaintiff is the owner of a mark that qualifies as a 'famous' mark in
light of the totality of the four factors listed in§ 1125(c)(2)(a);
(2) the defendant is making commercial use in interstate commerce of a
mark or trade name;
(3) defendant's use began after the plaintiff's mark became famous; and
(4) defendant's use causes dilution by lessening the capacity of the
plaintiff's mark to identify and distinguish goods or services.

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Defendants admit that IT2 uses the acronym "TMS" "to identify IT2's product as a
treasury management system," and present several defenses. Defendants argue that
their use is not a "use in commerce" or as a mark. (D.I. 9 at 4-8) In the alternative,
defendants aver that their use is descriptive fair use under 15 U.S.C. § 1115(b)(4). (D.I.
9 at 8-9) These are inherently factual questions best resolved at a later stage in the
proceedings.
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Defendants argue that they "do not use 'TMS' to identify the origin of their products,
but only describe the general class of goods." (D.I. 9 at 11) The source of plaintiff's
22-23)
claim is defendants' use of the TMS Marks with respect to services. (D.I. 1 at

,.m

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Lingo v. Lingo, 785 F. Supp. 2d 443, 455 (D. Del. 2011) (citing Times Mirror Magazines,
Inc. v. Las Vegas Sports News, 212 F.3d 157, 163 (3d Cir.2000)). According to the

statute:
[A] mark is famous if it is widely recognized by the general consuming
public of the United States as a designation of source of the goods or
services of the mark's owner. In determining whether a mark possesses
the requisite degree of recognition, the court may consider all relevant
factors, including the following:
(i) The duration, extent, and geographic reach of advertising and publicity
of the mark, whether advertised or publicized by the owner or third parties.
(ii) The amount, volume, and geographic extent of sales of goods or
services offered under the mark.
(iii) The extent of actual recognition of the mark.
(iv) Whether the mark was registered under the Act of March 3, 1881, or
the Act of February 20, 1905, or on the principal register.
15 U.S.C. § 1125(c)(2)(A). Defendants argue that "plaintiff has alleged no facts to
support the conclusory allegation that the TMS Marks have become famous." (D.I. 9 at
11) Plaintiff contends that "[t]he TMS Marks are registered and have become famous
and distinctive in the United States through its extensive, continuous and exclusive use
in connection with Plaintiff's products." (D.I. 1 at~ 35; D.I. 12 at 9) Viewing the
complaint in the light most favorable to plaintiff, plaintiff has alleged facts related to the
registration of the TMS Marks, the duration of their use, and the geographic extent of
sales of services under the marks. These facts are sufficient to support the allegation
that the marks are famous under the statute. Therefore, defendants' motion as to the

§ 43(c) claims is denied.
14. Delaware trademark dilution. Plaintiff alleges that defendants' acts
"constitutes a dilution of the TMS Marks and injures plaintiff's business reputation"
under 6 Del. C. § 3301 et seq. (D.I. 1 at~~ 40-43) The Delaware Trademark Act
("OTA") provides:

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Likelihood of injury to business reputation or of dilution of the distinctive
quality of a mark registered under this chapter, or a mark valid at common
law or a trade name valid at common law, shall be a ground for injunctive
relief notwithstanding the absence of competition between the parties, or
the absence of confusion as to the source of goods or services.
6 Del. C § 3313. In order to prevail on a claim brought pursuant to the OTA, a plaintiff
must demonstrate that there is a likelihood of dilution, not actual dilution. "Likelihood of
dilution requires 'some mental association between the marks' and can be defined as a
'blurring of a mark's product identification or the tarnishment of the affirmative
associations a mark has come to convey."' Sanofi-Aventis v. Advancis Pharm. Corp.,
453 F. Supp. 2d 834, 855 (D. Del. 2006) (quoting Barnes Grp. Inc. v. Connell Ltd.
P'ship, 793 F. Supp. 1277, 1304 (D. Del. 1992)). The TMS Marks are incontestable,
and plaintiff has pied facts sufficient to support a likelihood of confusion under the
Lanham Act, therefore, plaintiff has pied sufficient facts to go forward with a trademark
dilution claim under Delaware law. Defendants' motion is denied with respect to
Delaware trademark dilution.
15. Delaware unfair competition. Plaintiff alleges that defendants' acts
constitute unfair competition under the Delaware deceptive trade practices act
("DDTPA"), 6 Del. C. § 2532, because, in using the TMS Marks on defendants' website,
defendants "ha[ve] engaged in unfair, deceptive, and/or misleading advertising." (D.I. 1
at ,-r 45) Courts reviewing DDPTA violations apply the same standards as they apply to
trademark infringement claims (i.e., valid and protectable mark, plaintiff owns mark, and
likelihood of confusion). Keurig, Inc. v. Sturm Foods, Inc., 2012 WL 4049799 (D. Del.
2012) (citing Sanofi-Aventis, 453 F.Supp.2d at 847). "[P]roof of a Lanham Act claim
would necessarily meet the requirements for a claim under the DTPA." ScheringPlough Healthcare Prod., Inc. v. Neutrogena Corp., 702 F. Supp. 2d 266, 272 (0. Del.
2010). Plaintiff's pleading under the Lanham Act is sufficient to support unfair

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competition under the DDTPA, therefore, defendants' motion is denied with respect to
unfair competition.
16. Delaware common law claims. Plaintiff alleges that defendants' acts
constitute trademark infringement and unfair competition under Delaware common law.
(D.I. 1 at~~ 48-51) Defendants argue that, because "dismissal of Lanham Act claims is
warranted, it is also appropriate to dismiss duplicative common law claims." (D.I. 9 at
13) As above, plaintiff has pied sufficient facts to support Lanham Act trademark
infringement and unfair competition claims, therefore, the common law trademark and
unfair competition claims may proceed.
17. Conclusion. For the reasons stated, defendants' motion to dismiss (D. I. 8)
is denied. An order shall issue.

Senior Unite States District Judge

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