Michigan, State of v. M22 LLC

Filing 17

OPINION FINDING LACK OF JURISDICTION; signed by Judge Gordon J. Quist (Judge Gordon J. Quist, jmt)

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
__________________________

STATE OF MICHIGAN,
Plaintiff,
v.

Case No. 1:16-CV-1084

M22 LLC,

HON. GORDON J. QUIST

Defendant.
___________________________________/

OPINION FINDING LACK OF JURISDICTION
Plaintiff, State of Michigan, filed a complaint in the Ingham County Circuit Court seeking
declaratory relief in connection with a pending proceeding that the State filed against Defendant,
M22, LLC (M22), before the United States Patent and Trademark Office’s Trademark Trial and
Appeal Board (TTAB). In the TTAB proceeding, the State sought cancellation of certain registered
trademarks owned by M22 that depict the State’s M-22 trunkline marker. In its state-court
complaint, the State sought a declaratory judgment that the Manual on Uniform Traffic Control
Devices (MUTCD) applies to M22 and its use and registration of the State’s M-22 trunkline route
marker as a trademark, and that the use of the M-22 trunkline route marker as a trademark is
unlawful under both state and federal law. (ECF No. 1-1 at PageID.15, 28.) M22 removed the case
to this Court pursuant to 28 U.S.C. § 1441(a), on the ground that the assumed coercive action that
M22 would bring against the State would be a claim under the Lanham Act. M22 thus alleged that
this Court has jurisdiction pursuant to 28 U.S.C. § 1338(a). (ECF No. 1 at PageID.2, 7.)
Following removal, the Court issued an Order directing the parties to address the Court’s
jurisdictional concerns. (ECF No. 12.) The parties have filed briefs as directed. Having reviewed

the briefs, the Court concludes that it lacks declaratory judgment jurisdiction under both Article III
and the Declaratory Judgment Act because an actual controversy does not exist.1 Accordingly,
because the Court lacks jurisdiction to entertain the State’s declaratory judgment action, the Court
will remand this matter to the state court.
I. BACKGROUND
Pursuant to the Michigan Vehicle Code and federal law, the State has adopted the MUTCD
as a uniform system of traffic-control devices. (ECF no. 1-1 at PageID.13–14.) The MUTCD
embodies regulations adopted by the Federal Highway Administration and is the national standard
for all traffic-control devices, e.g., road signs, traffic signals, etc., installed on pubic streets,
highways, and private roads open to public travel. (Id. at PageID.2–3.) To qualify for federal
funding on road projects, recipient states must adopt the MUTCD, or a state manual in substantial
conformance with the MUTCD, and supplement the MUTCD or state manual as required by law and
with approval by the Federal Highway Administration. (Id. at PageID.20.) The State first included
its M-22 trunkline highway sign, with its distinctive white diamond design, in its 1971 version of
the MUTCD.
M22 is a limited liability company located in Traverse City, Michigan. M22 produces and
sells clothing and other retail merchandise that feature a depiction of the M-22 trunkline marker.
M22 also uses the M-22 trunkline marker to advertise events that originate near highway M-22. (Id.
at PageID.277.) M22 owns several registered trademarks that incorporate the State’s M-22 marker,
including Reg. No. 3348635, for use in association with apparel, and Reg. No. 3992159, for use in
association with retail store services (collectively “the Marks”). (ECF Nos. 5-2, 5-3.)
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The Court framed the issue in its Order as one of standing. The actual controversy requirement under the
Declaratory Judgment Act is coextensive with Article III’s constitutional limits, and includes Article III’s standing and
ripeness doctrines. See Fieger v. Mich. Supreme Court, 553 F.3d 955, 961 (6th Cir. 2009); Teva Pharms. USA, Inc. v.
Novartis Pharms. Corp., 482 F.3d 1330, 1338 (Fed. Cir. 2007).

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In May 2012, the State’s Attorney General determined that no entity can lawfully claim
exclusive control over use of the State’s trunkline route marker design. (ECF No. 1-1 at PageID.26.)
Thereafter, the State sent a letter to M22 seeking M22's cooperation in canceling the Marks, but
M22 refused. (Id.) M22 has threatened to sue other users of the State’s trunkline markers with M22, M-25, M-26, M-28, M-37, and M-119 in the diamond design for trademark infringement, but
it apparently has never threatened to sue the State for trademark infringement.

(Id. at

PageID.26–27.)
In December 2013, the State filed a proceeding before the TTAB seeking cancellation of the
Marks. The State alleged that M22's use of the Marks was in violation of the law, based on the
following provision from the MUTCD:
Traffic control devices shall be defined as all signs, signals, markings, and other
devices used to regulate, warn, or guide traffic, placed on, over, or adjacent to a
street, highway, pedestrian facility, or bikeway by authority of any public agency
having jurisdiction.
....
Any traffic control device design or application provision contained in this Manual
shall be considered to be in the public domain. Traffic control devices contained in
this Manual shall not be protected by a patent, trademark, or copyright, except for
the Interstate Shield and any other items owned by the [Federal Highway
Administration].
(Id. at PageID.18–19.) In August 2015, the TTAB issued an order denying the State’s motion for
summary judgment on its unlawful use in commerce claim, stating:
At a minimum, genuine disputes of material fact remain as to the legal effect, if any,
of the Manual on Uniform Traffic Control Devices (MUTCD), as supplemented,
whether the provisions of the MUTCD apply to [M22], whether there has been a
violation of the supplemented MUTCD, and, if so, whether such violation can be
considered unlawful so as to warrant the cancellation of [M22's] registrations.
(Id. at PageID.27, 34.) Thereafter, the State filed its instant complaint in state court, seeking a
judicial declaration that M22's use and registration of the Marks is unlawful.
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II. DISCUSSION
“[F]ederal courts are courts of limited jurisdiction and have a continuing obligation to
examine their subject matter jurisdiction throughout the pendency of every matter before them.”
In re Wolverine Radio Co., 930 F.2d 1132, 1137 (6th Cir. 1991); see also Ruhrgas AG v. Marathon
Oil Co., 526 U.S. 574, 583, 119 S. Ct. 1563, 1570 (1999) (“[S]ubject-matter [jurisdiction]
delineations must be policed by the courts on their own initiative.”). Accordingly, this Court may
only adjudicate claims “that (1) are within the judicial power of the United States, as defined in the
Constitution, and (2) that have been entrusted to them by a jurisdictional grant by Congress.” Chase
Bank USA, N.A. v. City of Cleveland, 695 F.3d 548, 553 (6th Cir. 2012) (internal quotation marks
omitted).
The Declaratory Judgment Act provides, in part, “In a case of actual controversy within its
jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may
declare the rights and other legal relations of any interested party seeking such declaration, whether
or not further relief is or could be sought.” 28 U.S.C. § 2201(a). The “actual controversy”
requirement under the Declaratory Judgment Act is coextensive with Article III’s case or
controversy requirement. Teva Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d 1330, 1338
(Fed. Cir. 2007) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-41, 57 S. Ct. 461, 463-64
(1937)).

The existence of a case or controversy is highly dependent upon the particular facts

at issue. The difference between an actual controversy and an abstract question in a given case “‘is
necessarily one of degree,’” and must be ascertained by examining the totality of the circumstances
to determine whether there is a “‘substantial controversy between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’”
Golden v. Zwickler, 394 U.S. 103, 108, 89 S. Ct. 956, 959-60 (1969) (quoting Md. Cas. Co. v. Pac.
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Coal & Oil Co., 312 U.S. 270, 273, 61 S. Ct. 510, 512 (1941)). In MedImmune, Inc. v. Genentech,
Inc., 549 U.S. 118, 127 S. Ct. 764 (2007), the Supreme Court reiterated that the proper inquiry “is
whether the facts alleged, under all the circumstances, show that there is a substantial controversy,
between parties having adverse legal interests, of sufficient immediacy and reality to warrant the
issuance of a declaratory judgment.” Id. at 127, 127 S. Ct. at 771 (quoting Md. Cas. Co.). The
Court rejected the Federal Circuit’s prior, more strict, “reasonable apprehension of imminent suit”
test for declaratory judgment standing as inconsistent with the Court’s prior decisions. Id. at 132
n.11, 127 S. Ct. at 774 n.11. The reasonable apprehension test required “both (1) an explicit threat
or other action by the patentee, which creates a reasonable apprehension on the part of the
declaratory plaintiff that it will face an infringement suit and (2) present activity which could
constitute infringement or concrete steps taken with the intent to conduct such activity.” Novartis,
482 F.3d at 1339. Post-MedImmune, a reasonable apprehension of suit can still serve as a basis for
a valid Article III controversy, but it is only “one of multiple ways that a declaratory judgment
plaintiff can satisfy the more general all-the-circumstances test to establish that an action presents
a justiciable Article III controversy.” Prasco, LLC v. Medicis Pharm. Corp., 537 F.3d 1329, 1336
(Fed. Cir. 2008).
An inquiry into the basis for federal jurisdiction in this case reveals, quite prominently, the
absence of a justiciable Article III controversy. Because the State seeks a declaratory judgment, the
Court must “look[] through the declaratory judgment” to determine “[t]he controversy in this case.”
Marel v. LKS Acquisitions, Inc., 585 F.3d 279, 280 (6th Cir. 2009); see also Benitec Australia, Ltd.
v. Nucleonics, Inc., 495 F.3d 1340, 1344 (Fed. Cir. 2007) (“A useful question to ask in determining
whether an actual controversy exists is what, if any, cause of action the declaratory judgment
defendant may have against the declaratory judgment plaintiff[.]”). The coercive action in this case,
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as M22 indicates in its notice of removal, would be a claim for trademark infringement under the
Lanham Act.
A coercive action is only theoretical at this point. The State does not allege in its complaint,
nor has it presented any evidence in its response to this Court‘s December 20, 2017, Order, that M22
has ever threatened to sue the State for trademark infringement. Nor does the State allege that M22
has mentioned, or done anything to indicate, that it believes the State is engaging in any conduct that
might infringe the Marks. See Alticor, Inc. v. Nutrisystem, Inc., 1:12-CV-256, 2012 WL 4794596,
at *2 (W.D. Mich. Oct. 9, 2012) (concluding that a letter from the defendants’ attorneys to the
plaintiff stating that the plaintiff’s use and registration of a mark infringed the defendants’ rights in
its mark in violation of the Lanham Act gave rise to a substantial controversy between the parties);
EchoStar Satellite LLC v. Finisar Corp., 515 F. Supp. 2d 447, 451–52 (D. Del. 2007) (finding an
actual controversy under MedImmune because the defendant was successful in a patent infringement
suit against a third party on the same patent at issue and the defendant issued a press release stating
its intention to continue licensing discussions with other companies). Without an indication from
M22 that the State is infringing, “the controversy exists in the mind of only one side, which makes
it speculative (as opposed to real) and one-sided (as opposed to between the parties).” Edmunds
Holding Co. v. Autobytel Inc., 598 F. Supp. 2d 606, 610 (D. Del. 2009); see also Trippe Mfg. Co.
v. Am. Power Conversion Corp., 46 F.3d 624, 627 (7th Cir. 1995) (“The focus of the inquiry must
rest on the defendant’s statements and conduct since an apprehension alone, if not inspired by
defendant’s actions, does not give rise to an actual controversy.” (internal quotation marks omitted)).
Moreover, the State does not allege that it is currently engaging in, or intends to engage in, any
conduct—such as selling t-shirts bearing the M-22 marker—that might expose it to a suit for
trademark infringement.

At bottom, the State is left to argue that the pending TTAB
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proceeding—that it initiated against M22—gives rise to an actual controversy under Article III.
However, the existence of such a proceeding, without more, does not show the existence of a live
controversy. See Surefoot LC v. Sure Foot Corp., 531 F.3d 1236, 1246 (10th Cir. 2008) (noting that
“because a party may oppose a trademark registration for reasons having nothing to do with any
infringement dispute between the trademark applicant and the opponent, courts should not take a
TTAB opposition filing, automatically and by itself, to be conclusive evidence of the existence of
a live dispute”); see also Vina Casa Tamaya S.A. v. Oakville Hills Cellar, Inc., 784 F. Supp. 2d 391,
396–97 (S.D.N.Y. 2011) (finding the “defendant’s opposition to plaintiff’s trademark registration
through a cease-and-desist letter and Notice of Opposition before the TTAB—accompanied by
settlement negotiations touching on use of the disputed mark . . . insufficient to create an actual
controversy based on infringement”).
In short, the totality of the circumstances does not demonstrate the existence of the requisite
actual controversy to invoke this Court’s jurisdiction.
The State’s response shows that it also lacks standing under Article III. To establish Article
III standing, a plaintiff must show injury-in-fact, a causal relationship between the injury and the
defendant’s challenged acts, and the likelihood that a favorable decision will redress the injury.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S. Ct. 2130, 2136 (1992). An injury-infact must be “concrete and particularized and actual or imminent.” Id. at 560, 112 S. Ct. at 2136.
A plaintiff who seeks declaratory relief can meet the standing requirements by showing “actual
present harm or a significant possibility of future harm . . . .” Peoples Rights Org., Inc. v. City of
Columbus, 152 F.3d 522, 527 (6th Cir. 1998). Citing Cunningham v. Laser Golf Corp., 222 F.3d
943 (Fed. Cir. 2000), the State argues that it need only show a belief that it is likely to be damaged
by M22's registration. Cunningham involved an appeal of a TTAB cancellation final decision; the
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instant case does not. Thus, Cunningham does not speak to standing in this case. Moreover, as the
Federal Circuit has recently observed, “although the immediacy and redressability requirements for
Article III standing can be relaxed when Congress accords a procedural right to a litigant—e.g., the
right to appeal an administrative decision—the ‘requirement of injury in fact is a hard floor of
Article III jurisdiction that cannot be removed by statute.’” PPG Indus., Inc. v. Valspar Sourcing,
Inc., __ F. App’x __, 2017 WL 526116 (Feb. 9, 2017) (quoting Consumer Watchdog v. Wis. Alumni
Res. Found., 753 F.3d 1258, 1263 (Fed. Cir. 2014)).
The State argues that it has shown harm from the Marks because (1) it risks losing federal
highway funding, (2) it will suffer irreparable harm if it is prevented from enforcing state and federal
law precluding a trademark in its highway markers, and (3) the Marks threaten its ability to continue
using its signs without the threat of lawsuits by M22. None of these arguments has merit.
As for the risk of losing federal highway funding, the State says that “[t]o qualify for and
remain eligible for federal highway funding, the State must comply with applicable federal statutes
and regulations.” (ECF No. 13 at PageID.2006 (italics added).) The State then argues that M22's
registrations violate state and federal law and harm the State. (Id.) But the State does not say how
M22's registration of the Marks means that the State itself is not complying with the MUTCD or
federal law in a manner that will subject it to losing federal highway funding. That is, the State cites
no statute, regulation, or case that requires it to police and prevent trademark registrations of the
State’s highway markers by third parties in Michigan or, for that matter, anywhere in the United
States, on risk of losing highway funding. Moreover, this argument is speculative at best; the State
does not allege or offer any evidence that the Federal Highway Administration or any other federal
agency has, in fact, threatened to withhold highway funding from the State because M22 has
registered the Marks. Thus, the State has not shown “actual present harm or a significant possibility
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of future harm” based on a loss of federal highway funding. Peoples Rights Org., Inc., 152 F.3d at
527.
As for its second alleged harm, it is difficult for the Court to see how a federal court’s denial
of declaratory relief, which, incidentally, is matter of discretion to begin with, Wilton v. Seven Falls
Co., 515 U.S. 277, 282, 115 S. Ct. 2137, 2140 (1995), can cause irreparable harm to a State. This
is so because if the State actually has standing to enforce the law or regulation at issue, some other,
more direct mechanism for enforcing it probably exists. In any event, the case the State cites to
support its argument, Maryland v. King, 133 S. Ct. 1 (2012), is easily distinguishable. In King,
Maryland was enforcing its criminal laws and sought a stay of the Maryland Court of Appeals
judgment pending the Supreme Court’s review of Maryland’s petition for a writ of certiorari. Thus,
Maryland was seeking injunctive relief to preserve a criminal conviction from its own courts and
was not seeking, as the State does here, what is essentially an advisory opinion on a matter pending
before a federal administrative body.
The State’s final proffered harm—the threat of future lawsuits by M22—fails because, as
indicated above, any such harm is speculative. See Hyatt Int’l Corp. v. Coco, 302 F.3d 707, 712 (7th
Cir. 2002) (“The declaratory judgment plaintiff must be able to show that the feared lawsuit from
the other party is immediate and real, rather than merely speculative.”); United Parcel Serv., Inc.
v. Pennie, No. 03 C 8019, 2004 WL 2064547, at *3 (N.D. Ill. Sept. 8,, 2004) (“UPS’s bare
speculation concerning the possibility that Pennie may, sometime in the future, bring a lawsuit
against it (which is all that UPS offers in this regard) is not sufficient to invoke this court’s power
to grant a declaratory judgment.”). Moreover, “[t]he mere existence of a potentially adverse
[trademark] does not cause an injury nor create an imminent risk of an injury.” Prasco, LLC, 537
F.3d at 1338.
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Finally, the State’s argument that the TTAB has already found standing is not persuasive.
As discussed above, this Court is bound by the strictures of Article III, while the TTAB is not.
III. CONCLUSION
For the foregoing reasons, the Court concludes that it lacks jurisdiction over the State’s claim
for declaratory relief. Because Michigan courts are not subject to Article III’s requirements and the
Court is not versed in Michigan’s standards for jurisdiction over declaratory judgment actions, the
Court will remand the case to the state court to allow it to decide wither to entertain the State’s
complaint.
A separate order will enter.

Dated: April 21, 2017

/s/ Gordon J. Quist
GORDON J. QUIST
UNITED STATES DISTRICT JUDGE

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