Tacori Enterprises v. Michael Joaillier, Inc.

Filing 18

ORDER denying 8 Motion to Dismiss for Failure to State a Claim. Signed by Judge Michael R. Barrett on 9/15/2016. (jee)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

Tacori Enterprises,
Plaintiff,

Case No. 1:15cv497

v.

Judge Michael R. Barrett

Michael Joaillier, Inc.
doing business as
James Free Jewelers,
Defendant.
OPINION & ORDER
This matter is before the Court upon Defendant Michael Joaillier, Inc. d/b/a
James Free Jewelers Motion for Dismiss (Doc. 8). Plaintiff Tacori Enterprises filed a
Response in Opposition (Doc. 9) and Defendant filed a Reply (Doc. 11).
I.

BACKGROUND
Plaintiff Tacori Enterprises (“Tacori”) brings this civil action against Defendant

Michael Joallier, Inc. d/b/a/ James Free Jewelers (“James Free”) for trademark
violations under the Lanham Act and other associated state law claims.
Plaintiff Tacori Enterprises is a designer, manufacturer, and marketer of fine
jewelry. (Doc. 1, at PAGEID#: 2). Tacori owns a number of valid trademarks, including
TACORI, TACORI TACORI TACORI, TACORI COLLECTION, TACORI GIRL, and
TACORI TUESDAY (collectively, the “Tacori Trademarks”). (Id. at PAGEID#: 3-4).
Among Tacori’s original jewelry designs are pieces of jewelry that display crescents,
known as “Tacori Crescent Jewelry.” (Id. at PAGEID#: 2). Tacori sells this jewelry
through authorized retailers, who receive licenses to display and use the various Tacori

Trademarks. (Id. at PAGEID#: 5). These authorized retailers are licensed only to sell
Tacori Crescent Jewelry to the general public and are prohibited from selling Tacori
Crescent Jewelry to other distributors or retailers. (Id.)
In 2014 and 2015, Tacori sold select pieces from its Tacori Crescent Jewelry line
to third-party distributor White Pine Trading, LLC (“White Pine”). (Id. at PAGEID#: 6;
Doc. 8-1, at PAGEID#: 76). The agreement between Tacori and White Pine expressly
permitted White Pine to sell this jewelry to dealers not authorized as Tacori retailers, but
specifically disclaimed any and all Tacori warranties on the pieces sold to White Pine.
(See Doc. 8-1, at PAGEID#: 76).
Defendant James Free is an independent retailer of fine jewelry and is in the
business of marketing and selling jewelry.

(Doc. 1, at PAGEID#: 5; Doc. 8, at

PAGEID#: 60). From 2003 to 2006, James Free was an authorized retailer of Tacori
jewelry, but James Free is no longer a Tacori-authorized retailer. (Doc. 1, at PAGEID#:
5-6; Doc. 8, at PAGEID#: 60). However, James Free currently advertises and sells
Tacori jewelry. (Id.) Specifically, James Free advertises and sells select pieces of
jewelry purchased from third-party distributor White Pine. (Doc. 1, at PAGEID#: 6, Doc.
8, at PAGEID#: 60).
There are factual allegations currently in dispute between the parties. First,
Tacori alleges that James Free has “marketed and sold pieces of the Tacori Crescent
Jewelry without informing customers that the Tacori Crescent Jewelry is being sold
without a warranty from Tacori.”

(Doc. 1, at PAGEID#: 6, 7).

James Free

acknowledges that it has used the Tacori crest in its advertisements, (Doc. 11, at
PAGEID#: 101), but expressly disputes the factual allegation that it has misinformed

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customers about the warranty.

Instead, James Free claims that it has “expressly

disclosed to any purchasers or potential purchasers of its Tacori merchandise that the
jewelry is protected by James Free’s warranty, not Tacori’s.” (Doc. 11, at PAGEID#:
104).
Second, Tacori alleges that James Free “is currently marketing, advertising and
selling Tacori Crescent Jewelry that Tacori did not sell to that third party distributor,” and
that James Free purchased this jewelry either directly or indirectly “from authorized
retail stores of Tacori in breach of Tacori’s contract with its authorized retailers.” (Doc.
1, at PAGEID#: 7). Defendant expressly disputes these factual allegations, claiming
instead that James Free “purchased all of its Tacori merchandise from White Pine.”
(Doc. 11, at PAGEID#: 106).
Finally, Tacori alleges that James Free “modified and/or altered pieces of the
Tacori Crescent Jewelry line that it purchased from third party sources,” and then sold
those pieces as “genuine and authentic Tacori Crescent Jewelry . . . without informing
the customer that the jewelry contains non-Tacori parts.” (Doc. 1, at PAGEID#: 7).
However, James Free expressly disputes these factual allegations, stating that “[a]t no
time in its 75-year history has James Free ever wrongfully modified or altered jewelry.”
(Doc. 8, at PAGEID#: 63-64).
Tacori’s Complaint asserts six causes of action against James Free: (1)
counterfeiting, (2) trademark infringement, (3) trade dress infringement and false
designation of origin, (4) violation of Ohio’s Deceptive Trade Practices Act, (5) common
law unfair competition, and (6) tortious interference with contract. (Doc. 1).
James Free has moved to dismiss all of Tacori’s claims under Federal Rule of

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Civil Procedure 12(b)(6).

(Doc. 8).

James Free argues the merchandise being

advertised and sold by James free is genuine, and under the “first sale” doctrine,
trademark law does not reach the sale of genuine goods bearing a true mark even if
such sale was without the owner’s consent.

James Free also argues that the

conclusory allegations in the complaint fail to state a claim under Rule 12(b)(6).
II.

ANALYSIS
A. Motion to Dismiss Standard
When reviewing a 12(b)(6) motion to dismiss for failure to state a claim, this

Court must "construe the complaint in the light most favorable to the plaintiff, accept its
allegations as true, and draw all reasonable inferences in favor of the plaintiff." Bassett
v. National Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th Cir. 2008) (quoting Directv,
Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007)). "[T]o survive a motion to dismiss, a
complaint must contain (1) 'enough facts to state a claim to relief that is plausible,' (2)
more than 'a formulaic recitation of a cause of action's elements,' and (3) allegations
that suggest a 'right to relief above a speculative level.'" Tackett v. M&G Polymers,
USA, LLC, 561 F.3d 478, 488 (6th Cir. 2009) (quoting Bell Atlantic Corp. v. Twombly,
550 U.S. 544 (2007)). A claim has facial plausibility when the pleaded factual content
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009).
B. First sale doctrine
James Free argues that any trademark claims should be dismissed because the
Lanham Act does not apply to the genuine merchandise being advertised or sold by
James Free.

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Under the first sale doctrine, “resale by the first purchaser of the original
trademarked item is generally neither trademark infringement nor unfair competition.”
Brilliance Audio, Inc. v. Haights Cross Communications, Inc., 474 F.3d 365, 369 (6th
Cir. 2007) (citing Prestonettes, Inc. v. Coty, 264 U.S. 359, 368-69 (1924)); Tumblebus
Inc. v. Cranmer, 399 F.3d 754, 766 (6th Cir. 2005) (“The first-sale doctrine provides that
‘a purchaser who does no more than stock, display, and resell a producer's product
under the producer's trademark violates no right conferred upon the producer by the
Lanham Act.’”) (quoting Sebastian Int'l, Inc. v. Longs Drug Stores Corp., 53 F.3d 1073,
1076 (9th Cir.), cert. denied, 516 U.S. 914, 116 S.Ct. 302, 133 L.Ed.2d 207 (1995)). As
the Sixth Circuit has explained, “[t]he rationale for the rule ‘is that trademark law is
designed to prevent sellers from confusing or deceiving consumers about the origin or
make of a product, which confusion ordinarily does not exist when a genuine article
bearing a true mark is sold.’” Id. (quoting NEC Elecs v. CAL Circuit Abco, 810 F.2d
1506, 1509 (9th Cir. 1987)).
However, the Sixth Circuit has recognized certain exceptions to the first sale
doctrine. For instance, “[t]he first sale doctrine offers no defense when the reseller used
the trademark in a manner likely to cause the public to believe the reseller was part of
the producer's authorized sales force or one of its franchisees.”

PACCAR Inc. v.

TeleScan Techs., LLC, 319 F.3d 243, 257 (6th Cir. 2003), overruled on other grounds
by KP Permanent Make–Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 125 S.Ct.
542, 160 L.Ed.2d 440 (2004)). Here, Tacori has alleged that James Free has used the
Tacori trademarks and certificates of authenticity to create the false impression that
James Free is an authorized Tacori retailer.

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Another situation “in which the first sale doctrine does not apply is ‘when an
alleged infringer sells trademarked goods that are materially different than those sold by
the trademark owner.’” Id. at 370 (quoting Davidoff & CIE, S.A. v. PLD Int’l Corp., 263
F.3d 1297, 1302 (11th Cir. 2001)).

In Brilliance Audio, the Sixth Circuit explicitly

adopted this exception to the first sale doctrine, noting that the “rationale behind the
Davidoff exception is that a material difference in a product is likely to cause consumer
confusion and could dilute the value of the trademark.” Id. “To be material, a difference
must be ‘one that consumers consider relevant to a decision about whether to purchase
a product.’” Id. (quoting Davidoff, 263 F.3d at 1302). However, “’[b]ecause a myriad of
considerations may influence consumer preferences, the threshold of materiality must
be kept low to include even subtle differences between products.’” Id. (quoting Davidoff,
263 F.3d at 1302). Thus, “the question of materiality is a fact-based inquiry requiring an
examination of the products and markets at issue.” Id. As such, “an allegation of a
material difference cannot properly be dismissed on 12(b)(6) grounds.” Id.
Tacori has alleged that James Free modified and/or altered pieces of Tacori
jewelry and then sold that modified and/or altered jewelry to its customers as genuine
Tacori merchandise. (Doc. 1, at PAGEID#: 7). By its nature, jewelry modified and/or
altered by a second party is not genuine Tacori merchandise. In addition, Tacori has
alleged that James Free is selling Tacori Crescent Jewelry without informing customers
that such jewelry is being sold without a Tacori warranty. (Id. at PAGEID#: 6, 7). The
difference between Tacori’s standard warranty and the warranty offered by James Free
could constitute a “material difference.” See R.F.A. Brands, LLC v. Beauvais, No. 1314615, 2014 WL 7780975, *9 (E.D. Mich. Dec. 23, 2014) (“As plaintiffs correctly argue,

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reselling products with inferior warranties constitutes a material difference negating the
first sale defense.”). Therefore, based on these allegations, the first sale doctrine would
not apply and James Free’s Motion to Dismiss is denied on this basis.
C. Counterfeiting Under 15 U.S.C. § 1114(1)
In Count One, Tacori has brought a claim for trademark counterfeiting under 15
U.S.C. § 1114(1).

James Free argues that Tacori has not established a claim for

trademark counterfeiting because Tacori did not allege that James Free intentionally
used the mark knowing that it was counterfeit.
In response, Tacori first argues that the authority on which James Free relies is
contrary to the plain language of the Lanham Act. Tacori asserts that counterfeiting
under the Lanham Act does not require knowing intent. In the alternative, Tacori argues
that it has sufficiently pled its claim regardless of whether intent is required.
This Court has explained that “to establish liability for trademark counterfeiting,
Plaintiff must first prevail on its infringement claim and then also show that Defendants
intentionally used Plaintiff's mark knowing it was a counterfeit.” Ohio State Univ. v.
Skreened Ltd., 16 F. Supp. 3d 905, 911 (S.D. Ohio 2014). In an unpublished decision,
the Sixth Circuit has also held: “To recover on a federal trademark counterfeiting claim,
a plaintiff must show that: (1) the defendant infringed a registered trademark in violation
of 15 U.S.C. § 1114; and (2) the defendant intentionally used the mark knowing it was a
counterfeit as the term counterfeit is defined in 15 U.S.C. § 1116.” Laukus v. Rio
Brands, Inc., 391 F. App'x 416, 425 (6th Cir. 2010) (citing 15 U.S.C. § 1117(b)). This
Court is bound by these decisions requiring intent.
Regardless, Tacori has sufficiently pled its counterfeiting claim. In its Complaint,

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Tacori alleges that James Free “modified and/or altered” pieces of Tacori Crescent
Jewelry which it then sold to consumers as genuine Tacori jewelry “without informing
the customer that the jewelry contains non-Tacori parts.” (Doc. 1, at PAGEID#: 7).
Tacori attached to its Complaint a picture of what it claims is a modified and/or altered
Tacori ring that was advertised on James Free’s Facebook page. (See Exhibit F, Doc.
1-7, at PAGEID#: 35). Tacori further alleges that the sale of this modified jewelry was
done “willfully.” (Doc. 1, at PAGEID#: 9). These allegations satisfy Tacori’s burden of
pleading intentionality and knowing use. Therefore, James Free’s Motion to Dismiss
Tacori’s claim in Count One for counterfeiting under 15 U.S.C. § 1114(1) is denied.
D. Trademark Infringement under 15 U.S.C. § 1114(1)
In Count Two, Tacori has brought a claim for trademark infringement under 15
U.S.C. § 1114(1). In order to state a claim for trademark infringement, a party must
allege: “(1) that it owns a trademark, (2) that the infringer used the mark in commerce
without authorization, and (3) that the use of the alleged infringing trademark is ‘likely to
cause confusion among consumers regarding the origin of the goods offered by the
parties.’” Coach, Inc. v. Goodfellow, 717 F.3d 498, 502 (6th Cir. 2013) (quoting
Leelanau Wine Cellars, Ltd. v. Black & Red, Inc., 502 F.3d 504, 515 (6th Cir. 2007). As
the Sixth Circuit has stated, “[t]he touchstone of liability under section 1114 is whether
the defendant’s use of the disputed mark is likely to cause confusion among consumers
regarding the origin of the goods offered by the parties.” Daddy’s Junky Music Stores,
Inc. v. Big Daddy’s Family Music Ctr., 109 F.3d 275, 280 (6th Cir. 1997).
James Free asserts that Tacori’s claim for trademark infringement fails because
James Free had consent to sell Tacori products pursuant to its contract with White Pine.

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However, Tacori points out that in the Complaint, it also alleges that James is currently
marketing and selling jewelry that it is not authorized to receive or sell, specifically Style
Nos. 2565RD9, 2620RDLGP, HT 2545B12 and 46-RD65.

Tacori also alleges that

James Free is selling Tacori Crescent Jewelry “without informing customers that the
Tacori Crescent Jewelry is being sold without a warranty from Tacori.” Finally, Tacori
alleges that James Free is modifying and/or altering pieces of Tacori Crescent Jewelry
without Tacori’s consent and selling them “without informing the customer that the
jewelry contains non-Tacori parts.” These allegations are sufficient at this stage in the
pleadings to state a claim for trademark infringement. Therefore, James Free’s Motion
to Dismiss Tacori’s claim in Count Two for trademark infringement under 15 U.S.C. §
1114(1) is denied.
E. Effect on Interstate Commerce
In Count Three, Tacori alleges that James Free’s conduct constitutes false
designation of origin in violation of 15 U.S.C. § 1125(a) (Section 43(a) of the Lanham
Act). 1 “A Lanham Act claim for false designation of origin must contain two elements:
(1) the false designation must have a substantial economic effect on interstate
commerce; and (2) the false designation must create a likelihood of confusion.”
Johnson v. Jones, 149 F.3d 494, 502 (6th Cir. 1998) (citing Lyon v. Quality Courts
United, Inc., 249 F.2d 790, 795 (6th Cir. 1957)). The analysis which applies to Section
43(a) claims under the Lanham Act also applies to Tacori’s state law claims in Count
Four (Ohio Deceptive Trade Practice Act under Ohio Revised Code 4165.02) and Count

1

In its Complaint, Tacori explains that it labeled Count Three as “Trade Dress
Infringement and False Designation of Origin” under 15 U.S.C. § 1125(a), but explains that
Count Three was mislabeled and should be amended to reflect that it is bringing a claim for
trademark infringement and false designation of origin. (Doc. 9, PAGEID#: 90 n.7).
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Five (Ohio common law unfair competition). See Clark v. Walt Disney Co., 642 F.
Supp. 2d 775, 784-85 (S.D. Ohio 2009) (“Because the Lanham Act and the Ohio
Deceptive Trade Practices Act are substantially similar, ‘an analysis appropriate for a
determination of liability under section 43(a) of the Lanham Act is also appropriate for
determining liability under the Ohio Deceptive Trade Practices Act.’”) (quoting
Worthington Foods, Inc. v. Kellog Co., 732 F. Supp. 1417, 1431 (S.D. Ohio 1990); ETW
Corp. v. Jireh Publ’g, Inc., 332 F.3d 915, 920 (6th Cir. 2003) (“Because trademark
claims under Ohio law follow the same analysis as those under the Lanham Act, our
discussion of the federal trademark claims will therefore encompass the state trademark
claims as well.”).
James Free argues that Counts Three through Five should be dismissed
because Tacori’s Complaint failed to allege that any false designation of origin has a
substantial effect on commerce as required under 15 U.S.C. § 1125(a).

To the extent

that this false designation hinders Tacori’s ability to conduct its interstate business, it
affects interstate commerce. See Johnson v. Jones, 149 F.3d 494, 502 (6th Cir. 1998).
Tacori has alleged that it “has made and continues to make a substantial
investment of time, effort, and expense in the design, manufacturing, and marketing of
its Tacori Crescent Jewelry under the Tacori Trademarks.” (Doc. 1, at PAGEID#: 4-5).
Tacori states that it advertises its Crescent Jewelry in a variety of national and trade
publications, as well as on the internet and through social media. (Id. at PAGEID#: 5).
Tacori explains that it partners with authorized retail stores throughout the United States
to sell Tacori Crescent Jewelry to the general public, imposing certain requirements on
these retailers as a condition of their partnership. (Id.)

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Tacori has alleged that James Free “operates its jewelry business in direct
competition with Tacori’s jewelry business and the authorized retailers of Tacori,” (Id. at
PAGEID#: 6-7), and has sold “pieces of the Tacori Crescent Jewelry that have no
warranty, that have been modified or altered . . . at 20% to 30% below MSRP.” (Id. at
PAGEID#: 8).

Finally, Tacori alleges that “Defendant’s aggressive and continued

marketing, advertisement, display and sale of Tacori Crescent Jewelry described above
has harmed and continues to harm Tacori and its authorized retailers.” (Id.) These
allegations sufficiently demonstrate a hindrance to Tacori’s ability to conduct its
interstate business at this stage in the pleadings.
Therefore, James Free’s Motion to Dismiss Tacori’s claims in Counts Three
through Five for false designation of origin under 15 U.S.C. § 1125(a), violation of the
Ohio Deceptive Trade Practices Act, and common law unfair competition is denied.
F. Tortious Interference with Contract
In Ohio, the elements of tortious interference with contract are: “(1) the existence
of a contract, (2) the wrongdoer’s knowledge of the contract, (3) the wrongdoer’s
intentional procurement of the contract’s breach, (4) the lack of justification, and (5)
resulting damages.” Fred Siegel Co., L.P.A. v. Arter & Hadden, 707 N.E.2d 853, 858
(Ohio 1999).
James Free claims that Tacori failed to plead facts showing the existence a
contract between Tacori and a third party with which James Free intentionally interfered.
However, in the Complaint, Tacori alleges that “Tacori’s contract with authorized
retailers requires the sale of Tacori Crescent Jewelry to the general public and prohibits
the sale of Tacori Crescent Jewelry to any distributor or retailer.” (Doc. 1, at PAGEID#:

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15). Tacori also alleges that “[f]rom 2003 to 2006, Defendant was an authorized retailer
of Tacori” and that “Defendant had actual knowledge of Tacori’s contractual relations
with its authorized retailers, and was aware that Tacori’s contract with its authorized
retailers requires the sale of Tacori Crescent Jewelry to the general public and prohibits
the sale of Tacori Crescent Jewelry to any distributor or retailer.” (Id. at PAGEID#: 5,
15). Attached to the Complaint are photos of Tacori Crescent Jewelry that James Free
is currently marketing which Tacori did not make available to White Pine. (Doc. 1, at
PAGEID#: 7). Tacori alleges that James Free purchased, directly or indirectly, this
jewelry from authorized retail stores of Tacori in breach of Tacori’s contract with its
authorized retailers. (Id.; see also id. at PAGEID#: 15). Tacori alleges that James Free
procured this jewelry without justification because it was without authorization. Finally,
Tacori alleged that James Free’s actions have “interfered with, impeded and hindered
Tacori’s relationships with its authorized retailers,” have “caused specific harm to
Tacori’s contractual relationship with the authorized retailers,” and have “proximately
caused damage to Tacori.” (Id. at PAGEID#: 15).
Therefore, James Free’s Motion to Dismiss Tacori’s claim in Count Six for
tortious interference with contract is denied.
III.

CONCLUSION
Based on the foregoing, Defendant’s Motion to Dismiss (Doc. 8) is DENIED.
IT IS SO ORDERED.
/s/ Michael R. Barrett
JUDGE MICHAEL R. BARRETT

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