Kaplan, Inc. et al v. Yun et al
Filing
60
OPINION AND ORDER 104279: The Court has considered all of the arguments raised by the parties. To the extent not specifically addressed, the arguments are either moot or without merit. For the foregoing reasons, the defendants' motion to dismiss is granted in part and denied in part. The Clerk is directed to close Docket No. 32. SO ORDERED. (Signed by Judge John G. Koeltl on 4/30/2014) (ama) Modified on 5/1/2014 (nt).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
Kaplan, Inc. ET AL.,
Plaintiffs,
- v.-
13 Civ. 1147 (JGK)
OPINION AND ORDER
Tracy Yun, ET AL.,
Defendants.
────────────────────────────────────
JOHN G. KOELTL, District Judge:
The plaintiffs, Kaplan, Inc. and MG Prep, Inc., bring this
action against defendants Tracy Yun and Manhattan Enterprise
Group, LLC (“MEP”), alleging that the defendants infringed and
misappropriated the plaintiffs’ trademarks, “Manhattan Prep” and
“Manhattan GMAT” (collectively, the “Manhattan marks”) by
running a competing business under the name “Manhattan Elite
Prep.”
The plaintiffs allege various causes of action under the
Lanham Act and the Anticybersquatting Consumer Protection Act
(ACPA), as well as several causes of actions under New York
State law.
This Court has federal question jurisdiction under 28
U.S.C. §§ 1331, 1338(a), and 1338(b) over the federal law claims
and supplemental jurisdiction under 28 U.S.C. § 1367 over the
state law claims.
The defendants now move to dismiss the
Amended Complaint pursuant to Rule 12(b)(6), or, in the
alternative, to convert the motion to a summary judgment motion
pursuant to Rules 12(d) and 56 of the Federal Rules of Civil
Procedure.
However, because the parties have not engaged in
discovery and the plaintiffs have not had the opportunity to
gather and present evidence and argument in opposition to a
summary judgment motion, the Court declines to convert the
motion into one for summary judgment.
See Fargas v. Cincinnati
Mach., LLC, --- F. Supp. 2d ---, No. 13 Civ. 4443, 2013 WL
6508863, at *1 (S.D.N.Y. Dec. 12, 2013).
I.
In deciding a motion to dismiss pursuant to Rule 12(b)(6),
the allegations in the complaint are accepted as true, and all
reasonable inferences must be drawn in the plaintiffs’ favor.
McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir.
2007); Arista Records LLC v. Lime Grp. LLC, 532 F. Supp. 2d 556,
566 (S.D.N.Y. 2007).
The Court’s function on a motion to
dismiss is “not to weigh the evidence that might be presented at
a trial but merely to determine whether the complaint itself is
legally sufficient.”
Cir. 1985).
Goldman v. Belden, 754 F.2d 1059, 1067 (2d
The Court should not dismiss the complaint if the
plaintiff has stated “enough facts to state a claim to relief
that is plausible on its face.”
U.S. 544, 570 (2007).
Bell Atl. Corp. v. Twombly, 550
“A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
2
misconduct alleged.”
(2009).
Ashcroft v. Iqbal, 556 U.S. 662, 678
While the Court should construe the factual allegations
in the light most favorable to the plaintiff, “the tenet that a
court must accept as true all of the allegations contained in a
complaint is inapplicable to legal conclusions.”
Id.
When presented with a motion to dismiss pursuant to Rule
12(b)(6), the Court may consider documents that are referenced
in the complaint, documents that the plaintiff relied on in
bringing suit and that are either in the plaintiff’s possession
or that the plaintiff knew of when bringing suit, or matters of
which judicial notice may be taken.
See Chambers v. Time
Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002).
In particular,
the Court may take judicial notice of official records of the
United States Patent and Trademark Office (PTO).
Telebrands
Corp. v. Del Labs., Inc., 719 F. Supp. 2d 283, 287 n.3 (S.D.N.Y.
2010).
II.
The Court accepts the allegations in the Amended Complaint
as true for purposes of this motion.
The plaintiffs and the
defendants run competing preparation courses for various
standardized tests including the Graduate Management Admission
Test (“GMAT”), Graduate Record Examinations (“GRE”), and the Law
School Admission Test (“LSAT”).
(See Am. Compl. ¶¶ 1, 5.)
3
The
plaintiffs have previously offered courses under the brand
“Manhattan GMAT.”
(Am. Compl. ¶ 3.)
Allegedly in July 2011,
the plaintiffs adopted a new umbrella brand, “Manhattan Prep,”
because they offered preparation courses for exams other than
GMAT; the plaintiffs continued to offer GMAT courses under the
brand “Manhattan GMAT.”
(Am. Compl. ¶¶ 3-4.)
Around December 2011, defendant Yun launched a business
offering GMAT, GRE, and LSAT preparation courses and registered
the domain name “manhattaneliteprep.com”; the defendants first
used the mark “Manhattan Elite Prep” in commerce in February
2012.
(Am. Compl. ¶¶ 5, 88, 111.)
confused between the two brands.
¶¶ 41-58.)
Consumers were allegedly
(See generally Am. Compl.
The plaintiffs specifically allege circumstances in
which potential students mistook “Manhattan Elite Prep” courses
for “Manhattan Prep” courses while purchasing the courses on
internet shopping websites such as Groupon or Gilt City.
(E.g.
Am. Compl. ¶¶ 44, 48, 52.)
The plaintiffs applied for registration of the trademark
“Manhattan Prep” with the PTO on May 4, 2012 in an “intent-touse” application under § 1(b) of the Lanham Act, 15 U.S.C.
§ 1051(b).
(Butera Decl. Ex. A (“Application”) at 5.)
The PTO
initially denied registration of the “Manhattan Prep” mark in
September 2012 because the mark was “primarily geographically
descriptive of the origin of [the plaintiffs’] services.”
4
(Butera Decl. Ex. B at 2.)
On March 14, 2013, the PTO further
found that the mark had not acquired secondary meaning.
Decl. Ex. C at 2.)
(Butera
However, the PTO subsequently reversed its
decision and approved the mark for publication on October 9,
2013.
On August 1, 2012, about three months after filing the
application with the PTO, the plaintiffs sent the defendants a
letter demanding that the defendants cease and desist from
infringing upon the Manhattan marks and that the defendants hand
over the infringing internet domain name. (Am. Compl. ¶ 86; Am.
Compl. Ex. J. at 4-5.)
The defendants responded on August 8,
2012, claiming trademark rights superior to the plaintiffs’
marks, as well as invalidity of the “Manhattan Prep” mark.
Compl. ¶ 87, Ex. K.)
(Am.
The plaintiffs replied on August 29, 2012,
claiming superior rights based on the plaintiffs’ alleged use of
the “Manhattan Prep” mark starting from July 2011.
¶ 88, Ex. L.)
(Am. Compl.
Following unsuccessful settlement discussions
between the parties, the present action was commenced on
February 20, 2013.
(Am. Compl. ¶ 90.)
In addition to the alleged infringement of the Manhattan
marks by Manhattan Elite Prep, the plaintiffs further allege
that defendant Yun previously infringed the “Manhattan GMAT”
mark in conducting a similar preparation-course business named
“Manhattan Review,” (Am. Compl. ¶¶ 59-63), and that Yun
5
subsequently had a trademark dispute with her former business
partner at Manhattan Review, (Am. Compl. ¶¶ 74-79).
III.
To state a claim for trademark infringement under § 43(a)
of the Lanham Act, 15 U.S.C. § 1125(a), a plaintiff must show
that it has a valid mark entitled to protection and that “the
defendant’s use of its mark is likely to cause an appreciable
number of ordinarily prudent purchasers confusion as to the
origin, sponsorship, or approval of the defendant’s product.”
Louis Vuitton Malletier S.A. v. Warner Bros. Entm’t Inc., 868 F.
Supp. 2d 172, 177 (S.D.N.Y. 2012) (citations and internal
quotation marks omitted).
In their opening papers, the
defendants have not argued that the Amended Complaint failed to
plead consumer confusion sufficiently, but have instead focused
their arguments on the validity of the plaintiffs’ trademarks
and the plaintiffs’ standing to sue.
A mark must be “distinctive” and not “generic” in order to
qualify as a protectable trademark.
Christian Louboutin S.A. v.
Yves Saint Laurent Am. Holdings, Inc., 696 F.3d 206, 216 (2d
Cir. 2012) (citation omitted).
For trademark purposes, terms or
phrases are usually classified as (1) generic, (2) descriptive,
(3) suggestive, or (4) arbitrary or fanciful.
Abercrombie &
Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976).
6
“Generic terms are never entitled to protection.
Suggestive,
arbitrary and fanciful terms, on the other hand, are inherently
distinctive and generally entitled to protection.
Descriptive
terms are not inherently distinctive, but are nonetheless
entitled to protection if they acquire secondary meaning in the
marketplace.”
Paco Sport, Ltd. v. Paco Rabanne Parfums, 86 F.
Supp. 2d 305, 310 (S.D.N.Y. 2000); see also Abercrombie & Fitch,
537 F.2d at 9-11.
Thus, “[t]o qualify for trademark protection,
an owner of a descriptive mark must demonstrate that the mark
had acquired secondary meaning before its competitor commenced
use of the mark.”
PaperCutter, Inc. v. Fay’s Drug Co., Inc.,
900 F.2d 558, 564 (2d Cir. 1990).
On this motion, there is no dispute that the term
“Manhattan Prep” is not inherently distinctive, because the
plaintiffs do not contend that the term “Manhattan Prep” is
suggestive, fanciful, or arbitrary.
Accordingly, the
plaintiffs’ term “Manhattan Prep” is protectable as a trademark
only if it had acquired secondary meaning before the defendants
commenced their use of the allegedly infringing mark in February
2012.
The defendants first rely on the PTO’s initial
determination in March 2013 that the “Manhattan Prep” mark had
not acquired secondary meaning.
(Butera Decl. Ex. C at 2.)
However, as the plaintiffs correctly point out, that
7
determination was reversed and is entitled to no deference.
See
Lebewohl v. Heart Attack Grill LLC, 890 F. Supp. 2d 278, 292
(S.D.N.Y. 2012).
Thus, the PTO’s initial determination carries
no weight on this motion to dismiss.
The defendants next argue that the allegations regarding
the plaintiffs’ commercial use prior to February 2012 are
insufficient.
The plaintiffs allege that they adopted the
“Manhattan Prep” brand in July 2011 and have “extensively
advertised, promoted[,] and marketed” their courses and
materials under the brand since that time.
34, 68, 88.)
(Am. Compl. ¶¶ 4,
The defendants argue that these allegations are
insufficient to establish commercial use before the defendants’
commercial use of their mark, because such allegations do not
specify which portion of the sales or advertisement expenditure
occurred prior to February 2012.
However, the defendants
essentially raise a dispute of fact.
The Court cannot resolve
such a factual dispute on a motion to dismiss but must take the
plaintiffs’ allegations as true.
With all inferences drawn in
favor of the plaintiffs, these allegations are sufficient to
plead extensive commercial use by the plaintiffs since July 2011
and prior to February 2012.
The defendants also rely on the plaintiffs’ trademark
application and assert that the application conclusively
establishes the lack of commercial use of the “Manhattan Prep”
8
mark by the plaintiffs as of May 2012, when the application was
filed.
However, nowhere in the application did the plaintiffs
state affirmatively that they had not yet started to use the
“Manhattan Prep” mark, and the only reference to the use of the
mark was in the status page of the PTO website and was in regard
to the basis of the application as a § 1(b) “intent-to-use”
application.
(Butera Decl. Ex. A at 3.)
It is well-established
that a party is not prohibited from filing an intent-to-use
application for a mark that the party has actually used in the
past, Stoller v. Sutech U.S.A., Inc., 199 F. App’x 954, 957
(Fed. Cir. 2006) (per curiam) (collecting cases); nor is an
intent-to-use applicant precluded from relying upon actual use
prior to the intent-to-use application in establishing priority.
Corporate Document Servs. Inc. v. I.C.E.D. Mgmt. Inc., 48
U.S.P.Q.2d 1477, 1998 WL 766713, at *3 (TTAB 1998).
Thus, the
fact that the plaintiffs filed an intent-to-use application in
May 2012 does not show that the plaintiffs were not actually
using the mark in commerce until after May 2012.
Even if the plaintiffs had taken a different position
before the PTO, to the extent that the defendants argue that the
plaintiffs are prevented from taking an inconsistent position in
this case, no estoppel applies here.
Although statements made
to administrative bodies including the PTO may create judicial
estoppel, see BeautyBank, Inc. v. Harvey Prince LLP, 811 F.
9
Supp. 2d 949, 958 (S.D.N.Y. 2011), “in general, courts do not
bind parties to their statements made or positions taken in ex
parte [trademark] application proceedings in front of the PTO.”
Perfect Pearl Co., Inc. v. Majestic Pearl & Stone, Inc., 887 F.
Supp. 2d 519, 534-35 (S.D.N.Y. 2012).
Moreover, judicial
estoppel is applicable only if the prior inconsistent position
is “adopted” by the tribunal in some way.
DeRosa v. Nat’l
Envelope Corp., 595 F.3d 99, 103 (2d Cir. 2010).
No records
from the PTO show that the PTO adopted the proposition that the
plaintiffs did not use the “Manhattan Prep” mark prior to May
2012.
Accordingly, the plaintiffs are not estopped from making
the assertion that they started using the “Manhattan Prep” mark
before the defendants’ allegedly infringing activity.
Finally, the defendants argue that, even assuming that the
plaintiffs started using the “Manhattan Prep” mark in July 2011,
the plaintiffs cannot establish secondary meaning as a matter of
law because the mark would be in use for only seven months by
the time the defendants began using the “Manhattan Elite Prep”
mark in commerce.
However, whether secondary meaning has been
established is a question of fact.
Each of the cases cited by
the defendants was decided not on a motion to dismiss, but on a
motion for summary judgment or after trial based on a complete
factual record.
See Saratoga Vichy Spring Co., Inc. v. Lehman,
625 F.2d 1037, 1043 (2d Cir. 1980); Rockland Exposition, Inc. v.
10
Alliance of Auto. Serv. Providers of N.J., 894 F. Supp. 2d 288,
297 (S.D.N.Y. 2012), as amended (Sept. 19, 2012); Black & Decker
Corp. v. Dunsford, 944 F. Supp. 220, 227-28 (S.D.N.Y. 1996);
Braun Inc. v. Dynamics Corp. of Am., 975 F.2d 815, 826 (Fed.
Cir. 1992); Sports Traveler, Inc. v. Advance Magazine
Publishers, Inc., 25 F. Supp. 2d 154, 166 (S.D.N.Y. 1998); Fraga
v. Smithaven MRI, No. 94 Civ. 0030, 1996 U.S. Dist LEXIS 22016,
at *4 (E.D.N.Y. 1996).
The defendants argue that a seven-month period is too short
to establish secondary meaning as a matter of law even at the
motion-to-dismiss stage.
proposition.
There is no support for that
To the contrary, “there is no magic time span that
confers secondary meaning.”
Rockland Exposition, 894 F. Supp.
2d at 322 (citation omitted).
It is not implausible for a mark
to acquire secondary meaning within months in certain peculiar
and extraordinary factual circumstances.
See Maternally Yours
v. Your Maternity Shop, 234 F.2d 538, 541, 544 (2d Cir. 1956)
(secondary meaning within eleven months); Noma Lites v. Lawn
Spray, 222 F.2d 716, 717 (2d Cir. 1955) (secondary meaning
possible within a short time due to seasonal nature of the
business); cf. L.A. Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d
1117, 1130 (Fed. Cir. 1993) (finding secondary meaning for trade
dress within six months).
Commercial use for only seven months
may well weigh heavily against finding secondary meaning on
11
summary judgment or at trial absent extraordinary circumstances.
See, e.g., Saratoga Vichy Spring, 625 F.2d at 1043; Sports
Traveler, 25 F. Supp. 2d at 166; Co-Rect Products, Inc. v.
Marvy! Adver. Photography, Inc., 780 F.2d 1324, 1332 (8th Cir.
1985) (“[W]e feel that in these circumstances ten months is
simply not sufficient time to establish secondary meaning in the
market place.”).
However, these cases do not support dismissal
at this stage without discovery on the plaintiffs’ purported use
of the “Manhattan Prep” mark during the seven-month period
before the defendants began using their mark.
Accordingly, the
plaintiffs’ claim based on the “Manhattan Prep” mark cannot be
dismissed on this ground.
With respect to the “Manhattan GMAT” mark, the defendants
argue that the plaintiffs have no standing to enforce the mark.
The defendants produced a letter agreement between the Graduate
Management Admission Council (“GMAC”) and the plaintiffs.
(Butera Decl. Ex. H.)
The defendants argue that, because the
letter agreement shows that GMAC owns the GMAT mark and that the
plaintiffs had no trademark rights in “Manhattan GMAT,” the
plaintiffs have no standing to assert claims on the basis of the
“Manhattan GMAT” mark.
“In adjudicating a motion to dismiss, a court may consider
only the complaint, any written instrument attached to the
complaint as an exhibit, any statements or documents
12
incorporated in it by reference, . . . any document upon which
the complaint heavily relies,” and any judicially noticeable
matters.
In re Thelen LLP, 736 F.3d 213, 219 (2d Cir. 2013).
Moreover, “a plaintiff’s reliance on the terms and effect of a
document in drafting the complaint is a necessary prerequisite
to the court’s consideration of the document on a dismissal
motion; mere notice or possession is not enough.”
Chambers, 282
F.3d at 153.
The letter agreement in this case is not a document on
which the plaintiffs rely--let alone “heavily” rely--in the
Amended Complaint.
Therefore, without converting the present
motion into one for summary judgment, which the Court has
declined to do, the Court cannot consider the letter agreement
in adjudicating this motion to dismiss.
See Allen v. Chanel
Inc., No. 12 Civ. 6758, 2013 WL 2413068, at *6 (S.D.N.Y. June 4,
2013); Maloney v. CSX Transp., Inc., No. 09 Civ. 1074, 2010 WL
681332, at *3 (N.D.N.Y. Feb. 24, 2010).
The defendants next argue that the Amended Complaint fails
to allege how the defendants infringed the “Manhattan GMAT”
mark.
Indeed, the allegations regarding actual consumer
confusion caused by the defendants are all directed at the
“Manhattan Prep” mark, not the “Manhattan GMAT” mark.
Compl. ¶¶ 6, 13, 44-58.)
(See Am.
However, likelihood of confusion,
rather than actual confusion, is the requirement for a claim of
13
trademark infringement.
Lois Sportswear, U.S.A., Inc. v. Levi
Strauss & Co., 799 F.2d 867, 875 (2d Cir. 1986); accord U.S.
Polo Ass’n, Inc. v. PRL USA Holdings, Inc., 800 F. Supp. 2d 515,
531 (S.D.N.Y. 2011), aff’d, 511 F. App’x 81 (2d Cir. 2013).
The
plaintiffs do allege that they have made substantial expenditure
on promoting the “Manhattan GMAT” mark.
35-36.)
(Am. Compl. ¶¶ 31-33,
The plaintiffs also allege that the use of Manhattan
Elite Prep infringes both “Manhattan” marks.
84, 95-100, 102-03.)
(Am. Compl. ¶¶ 80-
The Court cannot dismiss these allegations
on a motion to dismiss.
Therefore, the defendants’ motion to
dismiss the claims for trademark infringement and false
representation and unfair competition (Claims I and II) is
denied.
IV.
The plaintiffs also bring a claim for false advertising in
violation of § 43(a)(1)(B) of the Lanham Act, which provides a
cause of action against anyone who, “in commercial advertising
or promotion, misrepresents the nature, characteristics,
qualities, or geographic origin of his or her or another
person’s goods, services, or commercial activities.”
15 U.S.C. § 1125(a)(1)(B).
To state a claim for false
advertising under the Lanham Act, the plaintiffs must allege
either that “the challenged advertisement is literally false” or
14
that “the advertisement, while not literally false, is
nevertheless likely to mislead or confuse consumers.”
Turbon
Int’l, Inc. v. Hewlett-Packard Co., 769 F. Supp. 2d 262, 268
(S.D.N.Y. 2011) (citation and internal quotation marks omitted).
The defendants argue that the plaintiffs’ false advertising
claim does not allege material misrepresentations about the
nature, characteristics, qualities, or geographic origin of the
services and is a mere repetition of the trademark infringement
claims.
This argument is without merit.
The plaintiffs allege
instances of internet promotion as well as deliberate
misrepresentations by the defendants to prospective students in
promoting the defendants’ services.
(Am. Compl. ¶¶ 42-57.)
As
the Second Circuit Court of Appeals has explained, the
defendants’ improper marketing by creating the false impression
of association between their services and those of the
plaintiffs is a false claim about the defendants’ services and
is “actionable as false advertising.”
Twentieth Century Fox
Film Corp. v. Marvel Enterprises, Inc., 277 F.3d 253, 260 (2d
Cir. 2002).
Hence, the plaintiffs have sufficiently alleged a
plausible claim that the defendants’ use of the “Manhattan Elite
Prep” mark in their advertisement is capable of confusing or
misleading the consumers.
See Alzheimer’s Disease Research
Ctr., Inc. v. Alzheimer’s Disease & Related Disorders Ass’n,
Inc., --- F. Supp. 2d ---, No. 13 Civ. 3288, 2013 WL 5960748, at
15
*5 (E.D.N.Y. Nov. 8, 2013).
Accordingly, the defendants’ motion
to dismiss the Lanham Act false advertising claim is denied.
V.
The plaintiffs also bring a claim for cybersquatting under
the ACPA, 15 U.S.C. § 1125(d).
To state a claim under the ACPA,
a plaintiff must allege that “(1) its marks were distinctive at
the time the domain name was registered; (2) the infringing
domain names complained of are identical to or confusingly
similar to plaintiff’s mark; and (3) the infringer has a bad
faith intent to profit from that mark.”
Gioconda Law Grp. PLLC
v. Kenzie, 941 F. Supp. 2d 424, 430 (S.D.N.Y. 2013).
On a motion to dismiss, the Court should discount any
conclusory allegations.
See Iqbal, 556 U.S. at 678.
The
plaintiffs have proffered only conclusory allegations in support
of the ACPA claim.
The plaintiffs have pointed to only three
lines of conclusory allegations that the defendants registered a
“confusingly similar” domain name “with the bad faith intent to
profit” and “with full knowledge of Plaintiffs’ exclusive rights
in the MANHATTAN PREP mark.”
¶¶ 113, 115, 116.)
(Pls.’ Mem. at 20; Am. Compl.
No other allegations in the Amended
Complaint give rise to an inference of “bad faith intent to
profit” specifically from the infringing domain name.
The
allegation that the defendants infringed the plaintiffs’
16
trademark in registering and using a confusingly similar domain
name, in and of itself, is insufficient to establish the “bad
faith intent to profit” under the ACPA.
As another court in
this District has explained, “[t]he ACPA is not an all-purpose
tool designed to allow the holders of distinctive marks the
opportunity to acquire any domain name confusingly similar to
their marks.”
Gioconda Law Grp., 941 F. Supp. 2d at 437
(citation omitted).
Therefore, the plaintiffs’ cybersquatting claim must be
dismissed, because the allegations in the Complaint regarding
the defendants’ use of the domain name simply show another
aspect of the alleged trademark infringement, rather than an
attempt to profit specifically from “squatting” on the domain
name with bad faith.
These allegations do not suggest that
defendants “perpetrated the core activities that threaten to
result in the paradigmatic harm that the ACPA was enacted to
eradicate,” that is, “the proliferation of cybersquatting--the
Internet version of a land grab.”
See Lewittes v. Cohen, No. 03
Civ. 189, 2004 WL 1171261, at *8 (S.D.N.Y. May 26, 2004)
(citation and internal quotation marks omitted) (dismissing
cybersquatting claim).
Accordingly, the defendants’ motion to
dismiss the cybersquatting claim (Claim IV) is granted.
17
VI.
The plaintiffs also bring claims for trademark
infringement, unfair competition, and trademark dilution under
New York State law.
“The elements necessary to prevail on
causes of action for trademark infringement and unfair
competition under New York common law mirror the Lanham Act
claims.”
ESPN, Inc. v. Quiksilver, Inc., 586 F. Supp. 2d 219,
230 (S.D.N.Y. 2008) (citations omitted).
The defendants’
argument for dismissal of the common-law trademark infringement
and unfair competition claim mirrors the arguments for dismissal
of the parallel Lanham Act claims, namely, that the plaintiffs’
mark had not acquired secondary meaning at the time the
defendants adopted their mark. The Court has already rejected
this argument.
The defendants also argue that the plaintiffs have not
sufficiently alleged bad faith, as required for a common law
unfair competition claim.
See Pearson Educ., Inc. v. Kumar, 721
F. Supp. 2d 166, 191 (S.D.N.Y. 2010).
The plaintiffs have
alleged that the defendants adopted a highly similar mark with
full knowledge of the plaintiffs’ mark and with the intention to
profit from the goodwill of the plaintiffs’ mark. (Am. Compl.
¶¶ 5, 129).
The plaintiffs have also alleged that the
defendants, in answering telephone inquiries from prospective
students, deliberately confused the callers and attempted to
18
mislead potential customers into believing that they contacted
the plaintiffs.
(Am. Compl. ¶ 57.)
These allegations are
sufficient to support an inference of bad faith at this stage of
the litigation.
See Peek & Cloppenburg KG v. Revue, LLC, No. 11
Civ. 5967, 2012 WL 4470556, at *6 (S.D.N.Y. Sept. 19, 2012);
Pearson Educ., Inc., 721 F. Supp. 2d at 191, 193.
Therefore,
the defendants’ motion to dismiss the common-law claims for
trademark infringement and unfair competition (Claim VI) is
denied.
The plaintiffs’ trademark dilution claim is brought under
Section 360–l of the New York General Business Law (GBL).
To
prevail on a claim for trademark dilution under New York law,
the plaintiffs must show “(1) that it possesses a strong mark—
one which has a distinctive quality or has acquired a secondary
meaning . . . and (2) a likelihood of dilution by either
blurring or tarnishment.”
Fireman’s Ass’n of State of N.Y. v.
French Am. Sch. of N.Y., 839 N.Y.S.2d 238, 242 (App. Div. 2007).
“Unlike federal trademark dilution law, . . . New York’s
trademark dilution law does not require a mark to be ‘famous’
for protection against dilution to apply.”
Starbucks Corp. v.
Wolfe’s Borough Coffee, Inc., 588 F.3d 97, 114 (2d Cir. 2009).
The defendants argue that the plaintiffs’ mark is not
distinctive and has not acquired secondary meaning.
However, as
noted above, it is premature to draw such a conclusion at this
19
stage of the proceeding.
The defendants next argue that the
plaintiffs have failed to plead likelihood of dilution in the
form of either blurring or tarnishment.
However, the plaintiffs
allege that a large number of students came to associate the
defendants’ services with the plaintiffs’, (Am. Compl. ¶¶ 4257), and that the defendants’ services are of a different
quality than the plaintiffs’, (Am. Compl. ¶¶ 11-12).
These
allegations are sufficient to “rais[e] the possibility that the
[plaintiffs’] mark will lose its ability to serve as a unique
identifier of [the plaintiffs’ services],” and are therefore
sufficient to state a claim under GBL § 360-l.
Fireman’s Ass’n,
839 N.Y.S.2d at 242; see also The Name LLC v. Arias, No. 10 Civ.
3212, 2010 WL 4642456, at *8 (S.D.N.Y. Nov. 16, 2010);
CommScope, Inc. of N. Carolina v. Commscope (U.S.A.) Int’l Grp.
Co., 809 F. Supp. 2d 33, 39 (N.D.N.Y. 2011).
Accordingly, the
defendants’ motion to dismiss the trademark dilution claim
(Claim V) is denied.
VII.
The plaintiffs also bring a claim under GBL §§ 349 and 350.
Section 349 prohibits “[d]eceptive acts or practices in the
conduct of any business, trade or commerce or in the furnishing
of any service in this state.”
N.Y. Gen. Bus. Law § 349(a).
Section 350 prohibits “[f]alse advertising in the conduct of any
20
business, trade or commerce or in the furnishing of any service
in this state.”
Id. § 350.
Claims under Section 349 and
Section 350 are similar: in order to state a claim under either
provision, “a plaintiff must allege that a defendant has engaged
in (1) consumer-oriented conduct that is (2) materially
misleading and that (3) plaintiff suffered injury as a result of
the allegedly deceptive act or practice.”
Koch v. Acker,
Merrall & Condit Co., 967 N.E.2d 675, 675 (N.Y. 2012) (citation
and internal quotation marks omitted).
However, as the defendants have argued correctly, courts in
New York have routinely dismissed trademark claims brought under
Sections 349 and 350 as being outside the scope of the statutes,
because ordinary trademark disputes do not “pose a significant
risk of harm to the public health or interest” and are therefore
not the type of deceptive conduct that the statutes were
designed to address.
DePinto v. Ashley Scott, Inc., 635
N.Y.S.2d 215, 217 (App. Div. 1995); accord Perfect Pearl, 887 F.
Supp. 2d at 542; DO Denim, LLC v. Fried Denim, Inc., 634 F.
Supp. 2d 403, 409 (S.D.N.Y. 2009); Tommy Hilfiger Licensing,
Inc. v. Nature Labs, LLC, 221 F. Supp. 2d 410, 413 n.2 (S.D.N.Y.
2002) (“[T]he majority [of courts] have held that trademark
cases are outside the scope of this general consumer protection
statute.”).
The alleged “deceptive acts of practices” of the
defendants in this case are precisely the acts that constitute
21
the alleged trademark infringement, (Am. Compl. ¶¶ 137-38),
which are outside the scope of the statutes.
Accordingly, the
Section 349 and 350 claims fail as a matter of law, and the
defendants’ motion to dismiss Claim VII is granted.
VIII.
Finally, the plaintiffs bring a claim under New York State
law for unjust enrichment, alleging that the defendants are
unjustly enriched by, among other things, the infringing use of
the trademark.
Under New York law, in order to state a claim
for unjust enrichment, the plaintiffs must demonstrate that they
themselves conferred a direct benefit on the defendants.
Segal
v. Cooper, 944 N.Y.S.2d 65, 67 (App. Div. 2012); Prime Mover
Capital Partners L.P. v. Elixir Gaming Technologies, Inc., 898
F. Supp. 2d 673, 697 (S.D.N.Y. 2012).
In this case, there are
no such allegations: the defendants were enriched only
indirectly from the plaintiffs’ prior activities of promoting
their marks.
Accordingly, the plaintiffs have failed to state a
claim for unjust enrichment under New York State law.
However, under the Lanham Act, 15 U.S.C. § 1117(a),
“[u]njust enrichment warranting an accounting [of profits]
exists when the defendant’s sales were attributable to its
infringing use of plaintiff’s trademark.”
Burndy Corp. v.
Teledyne Indus., Inc., 748 F.2d 767, 772 (2d Cir. 1984)
22
(citation and internal quotation marks omitted); accord Ptak
Bros. Jewelry, Inc. v. Ptak, No. 06 Civ. 13732, 2009 WL 1514469,
*2 (S.D.N.Y. June 1, 2009).
To prevail on an unjust enrichment
claim, the plaintiffs must demonstrate that the enrichment is
“the fruit of willful deception.”
George Basch Co., Inc. v.
Blue Coral, Inc., 968 F.2d 1532, 1538 (2d Cir. 1992).
In this
case, the plaintiffs have alleged that the defendants’
infringement was willful in that the defendants answer telephone
inquiries from prospective students in “an intentionally
confusing and deceptive manner that callers have the false
impression that they have contacted . . . Manhattan Prep.”
Compl. ¶ 57.)
(Am.
The plaintiffs have alleged that the defendants
committed their acts of trademark infringement “willfully.”
(Am. Compl. ¶ 98.)
Hence, the plaintiffs would be able to
recover for unjust enrichment under the Lanham Act allegations,
if they are able to prove them, but the plaintiffs have not
stated a claim under the New York State law for unjust
enrichment.
Accordingly, the defendants’ motion to dismiss the
state law claim of unjust enrichment (Claim VIII) is granted.
23
CONCLUSION
The Court has considered all of the arguments raised by the
parties.
To the extent not specifically addressed, the
arguments are either moot or without merit.
For the foregoing
reasons, the defendants’ motion to dismiss is granted in part
and denied in part.
The Clerk is directed to close Docket No.
32.
SO ORDERED.
Dated:
New York, New York
April 30, 2014
____________/s/_____________
John G. Koeltl
United States District Judge
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