Emerson Electric Co. v. Emerson Quiet Kool Co. Ltd. et al

Filing 22

MEMORANDUM OPINION re 11 motion to dismiss. Signed by Judge Leonard P. Stark on 3/28/19. (ntl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
EMERSON ELECTRIC CO. ,
Plaintiff,
C.A. No. 17-1846-LPS

V.

EMERSON QUIET KOOL CO. LTD., and
HOME EASY LTD. ,
Defendants.

Phillip A. Rovner, Jonathan A. Choa, Alan R. Silverstein, POTTER ANDERSON & CORROON
LLP, Wilmington, DE
Attorneys for Plaintiff

Adam W. PoffandRobertM. Vrana, YOUNG CONAWAY STARGATT & TAYLOR, LLP,
Wilmington, DE
Michael P. Brennan, George D. Moustakas, Lisa M. DuRoss, HARNESS, DICKEY & PIERCE,
PLC, Troy, MI
Attorneys for Defendants

MEMORANDUM OPINION

March 28, 2019
Wilmington, Delaware

STARK, U.S District Judge:

Pending before the Court is a motion to dismiss (D.I. 11), filed by Emerson Quiet Kool
Co. Ltd. and Home Easy Ltd. (together, "Defendants"), the complaint filed by Plaintiff Emerson
Electric Co ' s ("Emerson Electric' s" or "Plaintiffs") (D.I. 1). Having considered the parties'
briefs (D.I. 12, 16, 18), the Court will grant-in-part and deny-in-part Defendants' motion.
I.

BACKGROUND

According to the Complaint, Plaintiff Emerson Electric owns the EMERSON marks and
uses the EMERSON marks on "products that play a significant role in the temperature, humidity
level and overall comfort of the home, such as air circulators, fans, air conditioning compressors,
HVAC controls, humidifiers, humidifying products and thermostats." (D.I. 1 ,r 7) Plaintiff has
used and promoted the EMERSON marks since at least 1890. (Id.

,r 8)

U.S. Trademark Registration No. 4,688,893 , for the word mark EMERSON QUIET
KOOL, was filed on March 1, 2010 and is currently registered to Defendant Emerson Quiet Kool
Co. Ltd. (Id.

,r 32)

Defendants use the EMERSON QUIET KOOL mark on "window and wall

room air conditioning units and dehumidifiers." (Id.

,r 22)

Plaintiff sued Defendants for allegedly infringing upon and misappropriating Plaintiffs
EMERSON marks. (Id.
U.S.C. § 1114 (id.

,r 5)

Specifically, Plaintiffs claim: (1) trademark infringement under 15

,r,r 51-59); (2) trademark infringement, unfair competition, and false

designation of origin under 15 U.S.C. § 1125(a)( l)(A) (id.
under 15 U.S.C. § 1125(c) (id.

,r,r 67-75); (4) violation of the Anticybersquatting Consumer

Protection Act, 15 U.S.C. § 1125(d) (id.
§ 3313 (id.

,r,r 60-66); (3) trademark dilution

,r,r 76-86); (5) trademark dilution under 6. Del. C.

,r,r 87-89); (6) unfair competition under 6. Del. C. § 2532 (id. ,r,r 90-95); (7) common

law trademark infringement, unfair competition, and misappropriation (id.

1

,r,r 96-99); and (8)

breach of contract (id.

,r,r 100-08).

Among the relief Plaintiff seeks is cancellation of United

States Trademark Registration No. 4,688,893. (Id.

II.

,r,r 109-16) 1

LEGAL STANDARDS
Evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)( 6) requires

the Court to accept as true all material allegations of the complaint. See Spruill v. Gillis, 372
F.3d 218, 223 (3d Cir. 2004). "The issue is not whether a plaintiff will ultimately prevail but
whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat
Factory Sec. Litig. , 114 F.3d 1410, 1420 (3d Cir. 1997) (internal quotation marks omitted).

Thus, the Court may grant such a motion to dismiss only if, after "accepting all well-pleaded
allegations in the complaint as true, and viewing them in the light most favorable to plaintiff,
plaintiff is not entitled to relief. " Maio v. Aetna, Inc., 221 F.3d 472, 481-82 (3d Cir. 2000)
(internal quotation marks omitted).
A well-pleaded complaint must contain more than mere labels and conclusions. See
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell At!. Corp. v. Twombly, 550 U.S. 544, 555

(2007). A plaintiff must plead facts sufficient to show that a claim has substantive plausibility.
See Johnson v. City of Shelby, 135 S. Ct. 346, 347 (2014). A complaint may not be dismissed,

however, for imperfect statements of the legal theory supporting the claim asserted. See id. at
346.

1

The parties' briefing makes reference to Em erson Radio Corp. v. Emerson Quiet Kool Co.,
2018 WL 1169132 (D.N.J. Mar. 6, 2018), a case brought by a different plaintiff- Emerson
Radio Corp., which also holds EMERSON marks - against the same Defendants as here. The
parties dispute the relevance of the Emerson Radio Court' s denial of a motion to dismiss. (See
D.I. 16 at 2 n.3 ; D.I. 18 at 2-3) The Court agrees with Defendants that "while some facts of
course overlap, the decision of the New Jersey court concerned a different, unrelated plaintiff
and was based on a substantively different set of allegations." (D.I. 18 at 3)
2

"To survive a motion to dismiss, a civil plaintiff must allege facts that ' raise a right to
relief above the speculative level on the assumption that the allegations in the complaint are true
(even if doubtful in fact).' " Victaulic Co. v. Tieman , 499 F.3d 227,234 (3d Cir. 2007) (quoting
Twombly, 550 U.S. at 555). A claim is facially plausible "when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged." Iqbal, 556 U.S. at 678 . At bottom, " [t]he complaint must state enough
facts to raise a reasonable expectation that discovery will reveal evidence of [each] necessary
element" of a plaintiffs claim. Wilkerson v. New Media Tech. Charter Sch. Inc. , 522 F.3d 315,
321 (3d Cir. 2008) (internal quotation marks omitted).
The Court is not obligated to accept as true "bald assertions," Morse v. Lower Merion
Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997) (internal quotation marks omitted), "unsupported

conclusions and unwarranted inferences," Schuylkill Energy Res., Inc. v. Pa. Power & Light Co.,
113 F.3d 405, 417 (3d Cir. 1997), or allegations that are "self-evidently false," Nami v. Fauver,
82 F.3d 63, 69 (3d Cir. 1996).

III.

DISCUSSION
Defendants seek to dismiss the entirety of the Complaint. They assert several bases for

dismissing one or more of Plaintiff's claims: (1) all claims fail because Plaintiff consented to the
use of the EMERSON QUIET KOOL trademark (id. at 6-8); (2) the Lanham Act claims are
barred by the doctrine of laches (id. at 8-1 O); (3) the unfair competition claims fail because
Plaintiff lacks standing (id. at 10-12); (4) the claim that the EMERSON QUIET KOOL mark was
abandoned fails because Plaintiff has not plausibly pled the required "intent to abandon" (id. at
12-14); and (5) the cybersquatting claim fails because Plaintiff has not plausibly pled the
required "bad faith intent" (id. at 14; see also D.I. 18 at 9). The Court will address each
contention in tum.
3

A.

Consent

Defendants contend that, in a 2011 agreement (D.I. 1-1 Ex. H) ("2011 Consent
Agreement" or "Agreement"), Plaintiff provided consent for Defendants to use the EMERSON
QUIET KOOL mark (D.I. 12 at 6-7), and further that Plaintiff has not plausibly alleged any
breach of this agreement (id. at 7-8). Thus, to Defendants, the 2011 Consent Agreement requires
that every one of Plaintiffs claims must be dismissed. (Id. at 8) The Court does not agree.
Plaintiff contends that the 2011 Consent Agreement does not even apply to Defendants.2
Even assuming it does, the Complaint plausibly alleges that Defendants are in breach of the
Agreement "for promoting their products in a way that leads consumers to associate Defendants
with Emerson Electric or its goods and/or services." (D.I. 1 ,r 182; see also D.I. 1-1 Ex. H, 2011
Consent Agreement at 2) ("Each party agrees not to promote, advertise, or distribute its
respective goods and/or services in any way that would lead consumers to associate it with the
other party or its goods and/or services.") Plaintiff includes in its Complaint a screenshot of a
website that sells a dehumidifier bearing the EMERSON QUIET KOOL mark yet associates the
dehumidifier with "Emerson Electric Manufacturing Company" (i.e., Plaintiff). (See D.I. 1

,r,r 43 -46)

Plaintiffs allegation of consumer confusion is plausible.3

Defendants argue that Plaintiff has not plausibly plead a breach of contract because
Plaintiff, in the 2011 Consent Agreement and an earlier 2009 agreement (D.I. 1-1 Ex. G) ("2009

2

Plaintiff argues that Defendants cannot enforce the 2011 Consent Agreement because: (1) they
are "not ... part[ies] to the Consent Agreement and do[] not have successive or other rights
thereunder" (D.I. 1 ,r,r 38, 39; D.I. 16 at 4); (2) their abandonment of the EMERSON QUIET
KOOL mark voids the Consent Agreement (D.I. 1 ,r 40; D.I. 16 at 4); and (3) the Agreement
does not extend to Defendants' dehumidifiers (D.I. 1 ,r 42). Plaintiffs claims are not defeated as
a matter of law by the Agreement even if Defendants are beneficiaries of that Agreement.
3

Defendants' contention that "the Complaint never identifies a single dehumidifier product sold
by Defendants or any example of consumer confusion" lacks merit. (D.I. 18 at 5)

4

Consent Agreement"), agreed that the Emerson marks and the EMERSON QUIET KOOL mark
then-existed without confusion, and Plaintiff does not allege any facts showing that the use of the
EMERSON QUIET KOOL mark has now become more confusing. (See D.I. 18 at 5-7) In fact,
the Consent Agreements only state that the parties ' respective marks "are, or can be made to be,
sufficiently different in their entireties as to .. . prevent likelihood of confusion" and that the
parties "do not anticipate any confusion" arising from the use of their marks. (D.I. 1-1 Ex. G,
2009 Consent Agreement ,r,r 7, 8 (emphasis added) ; D.I. 1-1 Ex. G, 2011 Consent Agreement

,r,r 4, 5) (emphasis added))

At best for Defendants this suggests that Plaintiff failed in 2009 and

2011 to anticipate the EMERSON QUIET KOOL mark could be used in 2017 (and thereafter) in
a confusing manner- a possibility that does not, at this stage, defeat any of Plaintiffs claims.

B.

Laches

The doctrine of laches consists of two elements: (1) "inexcusable delay in bringing suit,"
and (2) "prejudice to the defendant as a result of the delay." Santana Prod. , Inc. v. Bobrick

Washroom Equipment, Inc., 401 F.3d 123, 138 (3d Cir. 2005). Whether a delay is "inexcusable"
is determined by looking to "the most analogous" state statute of limitations. Id. at 135. The
most analogous Delaware statute of limitations to Lanham Act claims is the three-year statute of
limitations for non-violent tort claims. See Sanofi-Aventis v. Advancis Pharm. Corp., 453 F.
Supp. 2d 834, 856 (D. Del. 2006); 10 Del. C. § 8106 (specifying causes of action subject to 3year statute of limitations as including "action[s] to recover damages caused by an injury
unaccompanied with force or resulting indirectly from the act of the defendant"). Therefore, if
Plaintiff has brought its claim more than three years after it arose, Defendant enjoys a
"presumption of inexcusable delay and prejudice." Santana, 401 F.3d at 138.
Defendants contend that Plaintiffs Lanham Act claims are barred by the doctrine of
laches. (D.I. 12 at 8-10) Defendants argue that because the EMERSON QUIET KOOL mark
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was registered in 1979, "Plaintiff (or its predecessor-in-interest) was obligated to bring this claim
at least thirty years ago ." (Id. at 8) Defendants also dispute the allegation in the Complaint that
"the EMERSON QUIET KOOL mark was not used in commerce until May 2017 and that the
brand 'was inactive for many consecutive years preceding Emerson Quiet Kool's 2017 launch. "'
(Id. at 10) (quoting D.I. 1 137)

Defendants' arguments are unpersuasive. Lachesis an affirmative defense and cannot be
a basis for dismissing a claim unless its applicability is apparent on the face of the complaint.
See Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (" [W]e will not rely on an

affirmative defense ... to trigger dismissal of a complaint under Rule 12(b)(6).") Here, a
defense of laches is not apparent on the face of the Complaint. Instead, the Complaint alleges
that (1) "the actual date of first use in commerce of the mark shown in the ' 893 Registration was
not until May 2017;" and (2) "the Emerson Quiet Kool brand was inactive for many consecutive
years." (D.I. 1 137) The Court must take these well-pled factual allegations as true - and, doing
so, there was no inexcusable delay in filing this suit on December 22, 2017. See Sanofi-Aventis,
453 F. Supp. 2d 834, 856 (D. Del. 2006) (finding no inexcusable delay where Plaintiffs filed suit
two years and two months after gaining actual knowledge of infringing acts).
Defendants dispute the allegations in the Complaint, arguing that, in reality, their use of
the EMERSON QUIET KOOL mark has been ongoing since 2012, which is more than three
years prior to the filing of the Complaint. (D.I. 12 at 10 (citing D.I. 13, Xiao Deel.); D.I. 18 at 78 (citing D.I. 18-1 Exs. 3-6)) Defendants' denials of the well-pled factual allegations, and
Defendants' affidavits, are not properly considered at the motion to dismiss stage. See In re
Burlington Coat Factory Sec. Litig. , 114 F.3d 1410, 1426 (3d Cir. 1997) ("As a general matter, a

6

district court ruling on a motion to dismiss may not consider matters extraneous to the
pleadings.").

C.

Unfair Competition

Plaintiff has standing to bring its federal and state unfair competition claims. A plaintiff
suing under the Lanham Act's Section 1125(a) ordinarily must show injury to "a commercial
interest in reputation or sales" that (1) "flow[ s] directly" from deception wrought by the
defendant's conduct, and (2) "occurs when deception of consumers causes them to withhold
trade from the plaintiff." Lexmark Int 'l, Inc. v. Static Control Components, Inc. , 572 U.S. 118,
131-33 (2014). Similarly, under the Delaware Deceptive Trade Practices Act ("DTPA"), 6 Del.
C. § 2532, a litigant must show injury to a "business or trade interest" that is caused by the
defendant's "interference by unfair or deceptive trade practices" with the "horizontal
relationships between various business interests." Grand Ventures, Inc. v. Whaley, 632 A.2d 63 ,
70 (Del. 1993).
The Complaint plausibly alleges that Defendants have marketed their products in a way
that has caused and is likely to cause consumer confusion as between Plaintiff and Defendants.
(D.I. 1 ,r,r 43-46) In addition, the Complaint plausibly alleges that this confusion "has harmed,
and will continue to harm, [Plaintiffs] goodwill ... and its business reputation" as a
manufacturer and seller "of high-quality HVAC solutions." (Id.

,r,r 18, 20, 43, 45)

These are

cognizable injuries both to Plaintiffs "commercial interest in reputation" (as required by federal
law) and to Plaintiffs "business or trade interest" (as required by Delaware law). See Lexmark,
572 U.S. at 132; Grand Ventures, 632 A.2d at 70.
Defendants ' reliance on this Court's decision in Livery Coach Sols., L.L.C. v. Music
Express/E. , Inc., 245 F. Supp. 3d 639, 648 (D. Del. 2017), is misplaced. (See D.I. 12 at 11-12;

D.I. 18 at 8) Livery Coach held that unfair competition law did not provide standing to
7

customers who, like the plaintiff in Livery Coach, were "hoodwinked into purchasing a
disappointing product" from a defendant. 245 F. Supp. 3d at 648 (quoting Lexmark, 572 U.S. at
132). Here, by contrast, Plaintiff and Defendants are not in a vertical (e.g., consumer-producer)
relationship but, rather, in a horizontal (i.e., producer-producer) relationship, 4 which gives
Plaintiff standing to press its unfair competition claims.
Defendants argue that Plaintiff's products are not sufficiently "similar" to Defendants'
products, stating that "[a]ir conditioner parts are not air conditioners and dehumidifiers." (D.I.
18 at 8) (emphasis in original) However, neither federal nor Delaware unfair competition law
requires a plaintiff to be a direct competitor of a defendant. See Lexmark, 572 U.S. at 136
(rejecting "bright-line" rule that categorically prohibits suits by noncompetitors); 6 Del. C.
§ 2532(b) ("In order to prevail in an action under this chapter, a complainant need not prove

competition between the parties."). Rather, the key inquiry is proximate causation: "whether the
harm alleged is proximately tied to the defendant' s conduct." Lexmark, 572 U.S. at 136. For the
same reasons given above, the Complaint plausibly alleges that Plaintiff has been harmed by
Defendants' conduct. (See D.I. 1 ,r,r 18, 20, 43-46)

D.

Abandonment

The Lanham Act provides that:
A mark shall be deemed to be 'abandoned' ... when its use has been
discontinued with intent not to resume such use. Intent not to
resume may be inferred from circumstances. Nonuse for 3
consecutive years shall be prima facie evidence of abandonment.
15 U.S.C. § 1127 (emphasis added).

4

A "horizontal relationship" is one that "exists between at least two businesses on the same
market level, because they manufacture similar products in the same geographic region, or are
direct competitors." Chase Bank USA, NA . v. Hess, 2013 WL 867542, at *5 (D. Del. Mar. 7,
2013), report and recommendation adopted, 2013 WL 5314706 (D. Del. Sept. 20, 2013).
8

Defendants contend that the Complaint does not plausibly plead "intent not to resume
use" of the EMERSON QUIET KOOL mark. (D.I. 12 at 12-13) Specifically, Defendants argue
that " [t]he fact of the sale of goodwill and marks in the 2008 bankruptcy of Fedders North
America, the subsequent proceedings before the Trademark Trial and Appeal Board, the
recording of the assignments and the filing of an intent-to-use application all directly contradict
any inference that there has been an abandonment of the goodwill and marks assigned to
Emerson Quiet Kool by Plaintiffs predecessor." (Id. at 13)
Again the Court disagrees. The Complaint alleges that "the EMERSON QUIET KOOL
mark was not in use in commerce as of the claimed date of first use ofNovember 5, 2014 ...
[and] the Emerson Quiet Kool brand was inactive for many consecutive years preceding
Emerson Quiet Kool's 2017 launch." (D.I. 1 ,r 34) Taking these allegations to be true and
drawing all reasonable inferences in favor of Plaintiff, these allegations plausibly provide "prima
facie evidence of abandonment" or, at minimum, circumstances from which " [i]ntent not to
resume may be inferred." See 15 U.S.C. § 1127. Defendants' efforts to contradict the well-pled
factual allegations cannot prevail at this stage of the proceedings.
E.

Cybersquatting

The Anticybersquatting Consumer Protection Act (ACP A) provides, in relevant part:
A person shall be liable in a civil action by the owner of a mark ...
if ... that person ... has a bad faith intent to profit from that mark
... and registers, traffics in, or uses a domain name that ... in the
case of a mark that is distinctive at the time of registration of the
domain name, is identical or confusingly similar to that mark ....
15 U.S.C. § 1125(d)(l)(A) (emphasis added).
The Complaint alleges that Defendants' use of the emersonquietkool.com domain
violates the ACPA. (D.I. 1 ,r,r 76-86) Defendants argue that the Complaint does not plausibly

9

allege the "bad faith intent" requirement of the ACPA. (See D.I. 12 at 14; D.I. 18 at 9) The
Court agrees with Defendants.
Plaintiff alleges that "Defendants registered the Infringing Domain Name with the bad

faith intent to profit from the goodwill Emerson Electric has developed in the EMERSON
Marks." (D.I. 16 at 16 (quoting D.I. 1181) (emphasis added)) However, Plaintiffs allegation is
merely a conclusory, speculative, bald assertion, lacking any ''factual content' to support a
"reasonable inference" of bad faith intent. See Iqbal, 556 U.S. at 678 (emphasis added) ;

Victaulic, 499 F.3d at 234; Morse, 132 F.3d at 906. For instance, the Complaint does not allege
that Defendants "inten[ ded] to divert consumers from [Plaintiff's] online location to a site
accessible under [Defendants' ] domain name;" "offer[ed] to transfer, sell, or otherwise assign
[Defendants'] domain name to [Plaintiff] or any third party for financial gain without having
used, or having an intent to use, the domain name in the bona fide offering of any goods or
service;" "provi[ded] ... material and misleading false contact information when applying for
the registration of the domain name;" or "regist[ered] or acqui[red] ... multiple domain names
which [Defendants] know[] are identical or confusingly similar to marks of others." 15 U.S.C. §
1125(d)(l)(B)(i) (listing factors court may consider in determining whether person has "bad faith
intent"). In fact, the Complaint may arguably be read to allege that Defendants come within 15
U.S.C. § 1125(d)(l)(B)(ii), the ACPA' s safe harbor provision. Compare 15 U.S .C. §
1125(d)(l)(B)(i) ("In determining whether a person has bad faith intent, [a court may consider]
the trademark .. . rights of the person, if any, in the domain name .... ") with D.I. 1132
(acknowledging that U.S. Trademark Registration No. 4,688,893 , for word mark EMERSON
QUIET KOOL, is currently registered to Defendant Emerson Quiet Kool Co. Ltd.).

10

For the above reasons, the Court will dismiss Plaintiffs cybersquatting claim. However,
because it appears that amendment would not be futile, this dismissal will be without prejudice to
Plaintiff to amend its cybersquatting claim.

IV.

CONCLUSION
An appropriate Order follows .

11