Gelicity UK Limited v. Jell-E-Bath, Inc. et al

Filing 97

ORDER converting 86 Motion to Dismiss for Failure to State a Claim to a Motion for Judgment on the Pleadings and granting motion with leave to amend. Ordered by Judge I. Leo Glasser on 7/1/2013. (Levy, Joshua)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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GELICITY UK LIMITED,
Plaintiff,

MEMORANDUM AND ORDER
10 Civ. 5677 (ILG) (RLM)

- against JELL-E-BATH, INC., et al.,

Defendants, Third Party Plaintiffs, and Counter-Claimants,
- against MORRIS, et al.
Third Party Defendants and Counter-Defendant.
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GLASSER, Senior United States District Judge:
Plaintiff Gelicity UK Limited (“Gelicity”) brings this action against Jell-E-Bath,
Inc. (“Jell-E-Bath”) and Elizabeth De Alicante (collectively “defendants” or
“counterclaimants”) for a declaratory judgment of trademark non-infringement.
Defendants bring claims against Wayne Walton and Paul Morris (collectively “third
party defendants”) and counterclaims against Gelicity (collectively “Gelicity
defendants”) for federal trademark infringement and under state law.
Currently before the Court is Gelicity defendants’ motion to dismiss the
counterclaims and third party claims pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure. For the reasons set forth below, the motion is converted to one brought
pursuant to Rule 12(c) and is hereby GRANTED with leave for counterclaimants to
amend their pleadings.
BACKGROUND

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The following facts are taken from counterclaimants’ pleadings and public
documents; they are accepted as true for purposes of this motion.
Jell-E-Bath is an Oregon corporation that sells home spa treatments and other
products under the “JELLYBATH” trademark. Answer to Am. Compl. (“Answer”) ¶¶ 2,
8 (Dkt. No. 21). Jell-E-Bath filed an application to register the JELLYBATH trademark
with the United States Patent and Trademark Office (“USPTO”) on September 9, 2004,
and owns the use of the mark for “bath soaks, bath beads, body salt scrubs, bath lotions,
bath milks, bath oils, bath crystals, body oils, essential oils for inclusion in baths, eye
compresses for cosmetic purposes, mineral bath salt treatments not for medicinal use
and exfoliation bath soaks.” Id. ¶ 9. Alicante is the president of Jell-E-Bath and an
Oregon domiciliary. Id. ¶¶ 2, 9.
Gelicity is a United Kingdom corporation that sells bath products under the
trademark “GELLI BAFF.” Countercls. & Third Party Compl. (“Countercls.”) ¶¶ 6, 17
(Dkt. No. 21). Gelicity filed an application to register the GELLI BAFF trademark with
the United Kingdom Intellectual Property Office on December 15, 2006, and owns the
use of the mark in the United Kingdom for “children bathtime plaything[s].” U.S.
Trademark Application Serial No. 85178665 (filed Nov. 17, 2010) (“’665 App.”). 1 On
November 3, 2010, Jell-E-Bath informed Gelicity that it was considering legal action for
“use of the confusingly similar Gelli Baff” mark on any “goods manufactured and/or
distributed in the United States.” Answer ¶ 20.

“The Court may properly take judicial notice of official records of the United
States Patent and Trademark Office.” Rockland Exposition, Inc. v. Alliance of Auto.
Serv. Providers of N.J., 894 F. Supp. 2d 288, 301 n.6 (S.D.N.Y. 2012) (quotation
omitted).
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On November 17, 2010, Gelicity filed an application to register the trademark
GELLI BAFF with the USPTO based on its United Kingdom registration; the application
stated that the mark was “first used in commerce at least as early as 00/00/2007, and is
now in use in such commerce.” ’665 App. Gelicity then initiated this action for a
declaratory judgment of trademark non-infringement on December 8, 2010. Dkt. No. 1.
Defendants struck back on January 18, 2011 with counterclaims and third party claims
against Walton and Morris, who are principals of Gelicity and United Kingdom
domiciliaries. Dkt. No. 3. 2 Shortly thereafter, on January 25, 2011, Gelicity amended its
U.S. trademark application to exclude references to use in commerce, and instead
claimed “a bona fide intention to use . . . the mark in commerce.” ’665 App. That
application is currently pending and is suspended pending a final determination in this
action. Jell-E-Bath, Inc. v. Gelicity (UK) Ltd., No. 91201239 (T.T.A.B. Dec. 21, 2012).
Gelicity amended the Complaint on April 27, 2011, prompting counterclaimants
to file amended counterclaims and third party claims on May 10, 2011. Dkt. Nos. 20-21.
The gravamen of the counterclaims and third party claims is that GELLI BAFF is
confusingly similar to JELLYBATH, so Gelicity defendants are harming
counterclaimants’ reputation and goodwill through their sales and advertising.
Countercls. ¶¶ 21-23, 31-35, 39-47. Gelicity defendants answered these claims on May
31, 2011. Dkt. No. 22.
It is unclear what a dispute between United Kingdom and Oregon domiciliaries
is doing in the Eastern District of New York. Gelicity claims that “Alicante conducts
significant business in the nature of licensing from within this judicial district,” Am.
Compl. ¶ 4 (Dkt. No. 20), although the most likely explanation is that Gelicity’s counsel
is based in Brooklyn. In any event, the parties have waived any personal jurisdiction or
venue defenses. Azrelyant v. B. Manischewitz Co., No. 98-CV-2502, 2000 WL 264345,
at *5 (E.D.N.Y. Jan. 13, 2000) (citing Leroy v. Great Western United Corp., 443 U.S. 173,
180 (1979)).
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On May 17, 2013, Gelicity defendants moved to dismiss the counterclaims and
third party claims, arguing that counterclaimants had not sufficiently pleaded claims for
trademark infringement or unfair competition, or established individual liability against
the third party defendants. Gelicity Defs.’ Mem. (Dkt. No. 86). Counterclaimants filed
their opposition on June 3, 2013, and Gelicity defendants filed their reply on June 10,
2013. Countercls.’ Opp’n (Dkt. No. 92); Gelicity Defs.’ Reply (Dkt. No. 95).
DISCUSSION
I.

Legal Standards

Rule 12(b) requires that a motion to dismiss “be made before pleading if a
responsive pleading is allowed.” Gelicity defendants moved to dismiss pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure after answering the counterclaims and
third party claims. Nonetheless, a “Rule 12(b)(6) motion[] made after the close of the
pleadings ‘should be construed by the district court as a motion for judgment on the
pleadings under Rule 12(c).’” Brojer v. George, No. 11-CV-3156, 2013 WL 1833246, at *2
(E.D.N.Y. May 1, 2013) (quoting Patel v. Contemporary Classics of Beverly Hills, 259
F.3d 123, 126 (2d Cir. 2001)).
Rule 12(c) provides that “[a]fter the pleadings are closed—but early enough not to
delay trial—a party may move for judgment on the pleadings.” “In deciding a motion
under [Rule] 12(c), the Court applies the same standard as that applicable to a motion
under [Rule] 12(b)(6), accepting the allegations contained in the complaint as true and
drawing all reasonable inferences in favor of the nonmoving party.” Reyes v. City of
New York, No. 10-cv-1838, 2012 WL 37544, at *2 (E.D.N.Y. Jan. 9, 2012) (citing Ziemba
v. Wezner, 366 F.3d 161, 163 (2d Cir. 2004)).

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To survive a motion to dismiss pursuant to Rule 12(b)(6), the pleading 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)). Although detailed factual allegations are
not necessary, the pleading must include more than an “unadorned, the-defendantunlawfully-harmed-me accusation”; mere legal conclusions, “a formulaic recitation of
the elements of a cause of action,” or “naked assertions” will not suffice. Id. (internal
quotations and citations omitted). This plausibility standard “is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a defendant
has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556). Determining whether a
pleading states a plausible claim for relief is “a context-specific task that requires the
reviewing court to draw on its judicial experience and common sense.” Id. at 679.
II.

Trademark Infringement

The Lanham Act prohibits the “use in commerce [of] any reproduction,
counterfeit, copy, or colorable imitation of a registered mark in connection with the sale,
offering for sale, distribution, or advertising of any goods or services or in connection
with which such use is likely to cause confusion, or to cause mistake, or to deceive”
“without the consent of the registrant.” 15 U.S.C. § 1114(a).
“[T]he elements of a trademark infringement claim under the Lanham Act are:
(1) that the plaintiff holds a valid mark entitled to protection; (2) that the defendant
used the mark, (3) in commerce, (4) in connection with the sale or advertising of goods
or services (5) without plaintiff’s consent; and (6) that the defendant’s use of a similar
mark is likely to cause confusion.” Japan Press Serv., Inc. v. Japan Press Serv., Inc., No.
11 CV 5875, 2013 WL 80181, at *12 (E.D.N.Y. Jan. 2, 2013) (citing 1-800 Contacts, Inc. v.
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WhenU.Com, Inc., 414 F.3d 400, 406-07 (2005)). “[D]emonstrating use in commerce is
a threshold burden” because “‘no [] activity is actionable under the Lanham Act absent
the ‘use’ of a trademark.’” Kelly-Brown v. Winfrey, --- F.3d ----, 2013 WL 2360999, at *7
(2d Cir. May 31, 2013) (quoting 1-800 Contacts, 414 F.3d at 412).
A. Use in Commerce
“The history and text of the Lanham Act show that ‘use in commerce’ reflects
Congress’s intent to legislate to the limits of its authority under the Commerce Clause.”
Buti v. Perosa, S.R.L., 139 F.3d 98, 102 (2d Cir. 1998) (quotation omitted). A mark is
deemed to be in use in commerce when (1) “it is placed in any manner on the goods or
their containers,” and (2) “the goods are sold or transported in commerce.” 15 U.S.C. §
1127. However, “[b]ecause territoriality is the bedrock principle of trademark
law, . . . ‘use in commerce’ in the Lanham Act [] contemplate[s] use that, at some point
in the transaction, implicates the United States.” ITC Ltd. v. Punchgini, Inc., 482 F.3d
135, 164 n.26 (2d Cir. 2007).
Counterclaimants fail to sufficiently allege use in commerce. They merely claim
that Gelicity defendants “used in commerce infringements of [Jell-E-Bath’s] registered
trademark,” with no indication that Gelicity defendants—who are United Kingdom
domiciliaries—sold, transported, or advertised goods with the allegedly infringing mark
in the United States. Countercls. ¶ 21. Although Gelicity represented to the USPTO
that it used the GELLI BAFF mark in commerce since 2007, it amended its filings to
remove this representation before the USPTO took any action or the currently operative
Counterclaims and Third Party Complaint were filed. Countercls.’ Opp’n at 6-8; Gelicity
Defs.’ Reply at 4 n.3; ’665 App. Since the USPTO did not adopt Gelicity’s prior position
and counterclaimants have suffered no prejudice, Gelicity defendants are not estopped
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from denying use in commerce. See DeRosa v. Nat’l Envelope Corp., 595 F.3d 99, 103
(2d Cir. 2010). 3 Counterclaimants’ reliance on a picture of a box marked GELLI BAFF is
similarly unavailing since there is no indication that the box was sold in the United
States. Countercls.’ Opp’n at 7; ’665 App. In sum, counterclaimants offer “a formulaic
recitation of the elements of a cause of action [that] will not do.” Iqbal, 556 U.S. at 678
(quotation omitted).
B. Extraterritorial Application of the Lanham Act
Although counterclaimants do not sufficiently allege use in commerce within the
United States, “[t]he Lanham Act may reach allegedly infringing conduct that occurs
outside the United States when necessary to prevent harm to commerce in the United
States.” Atl. Richfield Co. v. ARCO Globus Int’l Co., 150 F.3d 189, 192 (2d Cir. 1998)
(citing Steele v. Bulova Watch Co., 344 U.S. 280, 285-86 (1952)). The Second Circuit
has set forth three factors for courts to balance when deciding whether to apply the
Lanham Act extraterritorially: (1) “whether the defendant is a United States citizen”; (2)
“whether there exists a conflict between the defendant’s trademark rights under foreign
law and the plaintiff’s trademark rights under domestic law”; and (3) “whether the
defendant’s conduct has a substantial effect on United States commerce.” Id. (citing
Vanity Fair Mills v. T. Eaton Co., 234 F.2d 633, 642 (2d Cir. 1956)). “‘The absence of
one of the above factors might well be determinative,’ and the absence of two ‘is

“Judicial estoppel applies to sworn statements made to administrative agencies”
if “1) a party’s later position is ‘clearly inconsistent’ with its earlier position; 2) the
party’s former position has been adopted in some way by the [agency] in the earlier
proceeding; and 3) the party asserting the two positions would derive an unfair
advantage against the party seeking estoppel.” Id. (citing New Hampshire v. Maine, 532
U.S. 742, 750-51 (2001)).
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certainly fatal.’” Juicy Couture, Inc. v. Bella Int’l Ltd., --- F. Supp. 2d ----, 2013 WL
978773, at *10 (S.D.N.Y. Mar. 12, 2013) (quoting Vanity Fair, 234 F.2d at 643).
Balancing the Vanity Fair factors weighs against extraterritorial application.
First, it is undisputed that all Gelicity defendants are United Kingdom domiciliaries.
Second, because Gelicity has registered its trademark in the United Kingdom,
extraterritorial application of the Lanham Act raises “questions about foreign trademark
law . . . sufficient to increase this Court’s caution in exercising jurisdiction over matters
more appropriately left to foreign courts.” Id. at *12 (quotation omitted). Since the
absence of two Vanity Fair factors is “fatal,” the Court need not reach the third. See
Vanity Fair, 234 F.2d at 643 (“[T]he Lanham Act . . . should not be given an
extraterritorial application against foreign citizens acting under presumably valid trademarks in a foreign country.”).
To summarize, counterclaimants cannot demonstrate that Gelicity defendants
used the allegedly infringing mark in commerce or that the Lanham Act should apply
extraterritorially. Accordingly, counterclaimants’ trademark infringement claims are
dismissed.
III.

State Law Claims

Counterclaimants bring claims for common law trademark infringement and
unfair competition under New York law.
A. Constitutional Constraints on Choice of Law
“A court may apply the law of any state . . . provided that state has a sufficient
interest in the dispute such that application of its law does not offend the Due Process
Clause or Faull Faith and Credit Clause of the United States Constitution.” Diehl v.
Ogorewac, 836 F. Supp. 88, 91-92 (E.D.N.Y. 1993) (citing Allstate Ins. Co. v. Hague, 449
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U.S. 302, 320 (1981) (Stevens, J., concurring)). The Court cannot constitutionally apply
substantive New York law to a dispute between Oregon and United Kingdom
domiciliaries where no “significant contacts or a significant aggregation of contacts”
with New York are alleged. Id. at 92 (quoting Allstate, 449 U.S. at 313 (majority
opinion)). Therefore, the Court may only constitutionally apply the substantive law of
Oregon or the United Kingdom to these claims.
B. Choice of Law Analysis
“A federal court . . . adjudicating state law claims that are pendent to a federal
claim must apply the choice of law rules of the forum state.” Licci ex rel. Licci v.
Lebanese Canadian Bank, SAL, 672 F.3d 155, 157 (2d Cir. 2012) (quotation omitted).
Under New York choice of law rules, if there is “an actual conflict between the laws of
the jurisdictions involved,” then “the law of the jurisdiction having the greatest interest
in the litigation will be applied. Interest analysis is a flexible approach intended to give
controlling effect to the law of the jurisdiction which, because of its relationship or
contact with the occurrence or the parties, has the greatest concern with the specific
issue raised in the litigation.” Id. at 157-58 (quotations omitted). In tort law disputes
where conduct-regulating laws are at issue, as opposed to loss-allocating rules, “the law
of the jurisdiction where the tort occurred will generally apply because that jurisdiction
has the greatest interest in regulating behavior within its borders.” Id. at 158
(quotations omitted).
Assuming that there is an actual conflict between Oregon and United Kingdom
law, Oregon has the greater interest in this litigation. Since this lawsuit deals primarily
with a federally registered trademark, any conduct regulated by state law must have
occurred within the United States. Moreover, any alleged harms to counterclaimants’
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“goodwill and reputation” must have occurred in Oregon, where they are domiciled, and
not the United Kingdom, where they do not claim to do business. Countercls. ¶¶ 35, 40.
Accordingly, Oregon law governs counterclaimants’ common law claims.
C. Common Law Claims
Under Oregon law, “[c]laims for common law trademark infringement are
analyzed using the same framework under the Lanham Act.” L & A Designs v. Xtreme
ATVs, Inc., No. 03:10-CV-627, 2012 WL 1532417, at *5 (D. Or. Apr. 30, 2012) (citing
Classic Instruments v. Vdo-Argo Instruments, 700 P.2d 677, 684 (Or. Ct. App. 1985)).
Similarly, “[i]n unfair competition claims, a court ‘is guided by the same principles that
are applied in the protection of individuals in the use of trademarks and trade names.’”
Id. (quoting Umpqua Broccoli Exchange v. Um-Qua Valley Broccoli Growers, 245 P.
324, 327 (Or. 1926)). Since counterclaimants have not shown that Gelicity defendants’
used the allegedly infringing mark in commerce within the United States,
counterclaimants’ common law trademark and unfair competition claims are dismissed.
IV.

Leave to Amend

Counterclaimants request leave to amend pursuant to Rule 15(a) of the Federal
Rules of Civil Procedure if the Court dismisses any of its claims. Countercls.’ Opp’n at
13. Leave to amend shall be freely given when justice so requires. Fed. R. Civ. P.
15(a)(2). “A party that has failed to state a claim should generally be afforded an
opportunity to amend its complaint or counterclaim, but leave to amend need not be
granted if an amended complaint or counterclaim would also fail to state a claim.”
Gortat v. Capala Bros., Inc., 585 F. Supp. 372, 377 (E.D.N.Y. 2008).
Counterclaimants’ proposed additional allegations cure the deficiencies in the
Counterclaims and Third Party Complaint. For example, counterclaimants intend to
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allege that “Gelicity or its distributors displayed and sold Gelli Baff at the Dallas World
Trade Center at a trade show on or about June 2010.” Countercls.’ Opp’n at 14.
Advertising and promoting goods with an allegedly infringing mark, even if Gelicity
defendants did not ship the goods themselves, sufficiently alleges use in commerce.
Peek & Cloppenburg KG v. Revue, LLC, No. 11 Civ. 5967, 2012 WL 4470556, at *4
(S.D.N.Y. Sept. 19, 2012). Similarly, counterclaimants propose alleging that “Paul
Morris and Wayne Walton negotiated the agreement with PlaSmart, Inc. to distribute
Gelli Baff in the United States.” Countercls.’ Opp’n at 14. “Employees who direct,
control, ratify, participate in, or are the moving force behind a Lanham Act violation can
be held personally liable for those violations.” Merck Eprova AG v. Brookstone Pharm.,
LLC, --- F. Supp. 2d ----, 2013 WL 363382, at *17-18 (S.D.N.Y. Jan. 31, 2013) (citing
cases). Therefore, counterclaimants’ motion to amend is granted.
CONCLUSION
For all of the foregoing reasons, Gelicity defendants’ motion is converted to one
brought pursuant to Rule 12(c) of the Federal Rules of Civil Procedure and is hereby
GRANTED with leave for counterclaimants to amend their pleadings.
SO ORDERED.
Dated:

Brooklyn, New York
July 1, 2013
/s/ ILG
_
I. Leo Glasser
Senior United States District Judge

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