Springboards to Education Inc v. Demco Inc

Filing 102

MEMORANDUM OPINION AND ORDER denying 87 MOTION to Dismiss for Failure to State a Claim filed by W W Grainger Inc. (Ordered by Judge Sidney A Fitzwater on 12/5/2017) (Judge Sidney A Fitzwater)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
SPRINGBOARDS TO EDUCATION,
INC.,
Plaintiff-counterdefendant,
VS.
DEMCO, INC.,
Defendant-counterplaintiff,
and
W.W. GRAINGER, INC., et al.,
Defendants.

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Civil Action No. 3:16-CV-2398-D

MEMORANDUM OPINION
AND ORDER
Plaintiff-counterplaintiff Springboards to Education (“Springboards”) sues defendantcounterplaintiff Demco, Inc. (“Demco”) and defendants W. W. Grainger, Inc. (“Grainger”)
and Collaborative Summer Library Program (“CSLP”) to recover on federal- and state-law
trademark and related claims. Grainger moves to dismiss Springboards’ third amended
complaint (“complaint”) for failure to state a claim on which relief can be granted. For the
reasons that follow, the court denies the motion.
I
Springboards sells products and programs for use by educators to incentivize children
to read. One product—the Read a Million Words Campaign—is a customizable campaign
that encourages students to read one million words by the end of the school year.

Springboards secured several trademarks to protect its product, including “Read a Million
Words,” “Millionaire Reader,” “Millionaire’s Reading Club,” “Million Dollar Reader,” and
“Feel Like a Million Bucks.”
This lawsuit is based on allegedly infringing products sold by Demco, a competitor
of Springboards, and Grainger, a business-to-business distributor of maintenance products.
Springboards asserts that Demco and Grainger, through the Upstart brand that they each
owned at different points in time, sold products that copied the Read a Million Words
program. These products include a “Bank on Books!” Activity Guide (“Activity Guide”) that
contains a large million dollar bill with a cutout in the center for a child’s face, and the
Million Dollar Reader trademark, as well as a million dollar bill bookmark (“Bookmark”)
that Springboards alleges contains trademarks infringing on Springboards’ Million Dollar
Reader trademark. Springboards also alleges that Upstart’s catalogue contains other
products, including bags, that copy Springboards’ Million Dollar Reader trademark.
Springboards asserts that these products were distributed under Upstart and Edupress brands
by Lab Safety Supply, Inc. (“LSS”) and Highsmith. Grainger acquired LSS and Highsmith
at an unspecified point in time. Demco later acquired from Grainger the assets of Highsmith,
including the Upstart brand.1
Springboards brought this lawsuit against Demco alleging seven claims of trademark

1

The third amended complaint alleges that Demco acquired the assets of Highsmith
from Grainger at some point in time, but that further discovery is necessary “to determine the
precise nature of Grainger’s relationship with Lab Safety Supply, Inc. and Highsmith at all
material times.” 3d Am. Compl. 15, ¶ 51.
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infringement. It later amended its complaint to include Grainger and CSLP as defendants.
In the current complaint,2 Springboards alleges seven claims for trademark infringement
against Grainger, Demco, and CSLP.3 It maintains that Grainger is liable for selling
infringing products under the Upstart and Edupress brands during the period spanning from
its acquisition of LSS and Highsmith to when it sold Highsmith to Demco. It alleges, in
pertinent part:
[o]n information and belief, Grainger and later, Demco
distributed a million dollar bill bookmark for educators to use in
connection with a “Million Word Challenge.” On information
and belief, the bookmark contained trademarks identical to or
confusingly similar to Springboards to Education’s Million
Dollar Reader® Trademark.
3d Am. Compl. 15, ¶ 53.
The Infringing Activity Guide also has been disseminated under
the Upstart, Highsmith, and/or Lab Safety Supply, Inc. name or
Brands by Grainger and, later, by Demco through the Upstart,
Highsmith, and/or Lab Safety Supply, Inc. name or Brands.
Id. at 15-16, ¶ 54.
Springboards also asserts that Grainger continued to be jointly responsible with

2

Springboards moved for and obtained leave to file a third amended complaint. The
court denied without prejudice Grainger’s pending motion to dismiss Springboards’ second
amended complaint for failure to state a claim.
3

Count 1 alleges trademark counterfeiting, in violation of 15 U.S.C. § 1114. Count
2 alleges trademark infringement, in violation of 15 U.S.C. § 1114. Count 3 alleges false
designations of origin false descriptions, in violation of 15 U.S.C. § 1125(a). Count 4 alleges
trademark dilution, in violation of 15 U.S.C. § 1125(c). Count 5 is based on the Texas AntiDilution Statute. Tex. Bus. & Com. Ann. Code § 16.103. Count 6 alleges common law
trademark infringement. And Count 7 is based on common law unfair competition.
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Demco for the sale of allegedly infringing products:4
On information and belief, by virtue of its merger/acquisition of
Lab Safety Supply, Inc. and Highsmith to claim a copyright on
the Infringing Activity Guide, Grainger continued to be jointly
responsible for the continued publication and dissemination of
the Infringing Activity Guide after Demco acquired the assets of
Highsmith from Demco.
Id. at 16, ¶ 57.
Grainger now moves to dismiss under Fed. R. Civ. P. 12(b)(6), contending that
Springboards has failed to state a claim on which relief can be granted. Springboards
opposes the motion.
II
Under Rule 12(b)(6), the court evaluates the pleadings by “accept[ing] ‘all
well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.’” In re
Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting Martin F. Eby
Constr. Co. v. Dall. Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)). To survive a
motion to dismiss, Springboards must allege enough facts “to state a claim of relief that is
plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant[s] [are] liable for the misconduct alleged.” Ashcroft

4

Springboards also alleges that distributor CSLP, a consortium of states that aim to
offer a unified summer reading theme among member libraries, contributed to such
infringement. According to Springboards, CSLP marketed Demco’s products and linked to
the Activity Guide on its website.
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v. Iqbal, 556 U.S. 662, 678 (2009). “The 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.; see also Twombly, 550 U.S. at 555 (“Factual allegations must be enough
to raise a right to relief above the speculative level[.]”). “[W]here the well-pleaded facts do
not permit the court to infer more than the mere possibility of misconduct, the complaint has
alleged—but it has not ‘show [n]’—‘that the pleader is entitled to relief.’” Iqbal, 556 U.S.
at 679 (quoting Fed. R. Civ. P. 8(a)(2)). Furthermore, under Rule 8(a)(2), a pleading must
contain “a short and plain statement of the claim showing that the pleader is entitled to
relief.” Although “the pleading standard Rule 8 announces does not require ‘detailed factual
allegations,’” it demands more than “‘labels and conclusions.’” Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 555). And “‘a formulaic recitation of the elements of a cause
of action will not do.’” Id. (quoting Twombly, 550 U.S. at 555).
III
The court first considers Grainger’s contention that Springboards has not pleaded facts
supporting the essential elements of its claims.
A
Grainger maintains that Springboards has pleaded no facts showing that Grainger used
a trademark in commerce relating to the Activity Guide or the Bookmark. Grainger contends
that all the facts establish Demco and CSLP’s alleged use of Springboards’ trademarks in
Demco’s products. Thus it maintains that the court should dismiss Springboards’ claims
because all of its claims require that Springboards show that Grainger used an infringing
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trademark.
All seven of Grainger’s claims require that Grainger actually use the allegedly
infringing trademark.5 Accepting the facts of the complaint as true, and viewing them in the
light most favorable to Springboards, the complaint plausibly pleads that Grainger used the
Million Dollar Reader Trademark in commerce. Grainger distributed the Activity Guide
under the Upstart, Highsmith, or LSS brand. Grainger also distributed a million dollar bill
bookmark for educators to use as part of a “Million Word Challenge.” Grainger remains
connected online to the use of Springboards’ trademarks based on an Internet search.6 And
Grainger is involved in the ongoing publication of the Activity Guide, even after Demco’s
acquisition of Highsmith, based on its claim to ownership of the copyright on the infringing
product. The court therefore holds that Springboards has plausibly pleaded Grainger’s use

5

Claims 1 and 2 under 15 U.S.C. § 1114 require that any person “use in commerce any
reproduction, counterfeit, copy or colorable imitation of a registered mark[.]” Claim 3, under
15 U.S.C. § 1125(a), specifies that a violation occurs when any person “uses in commerce”
an allegedly infringing mark. Claim 4, for trademark dilution under 15 U.S.C. § 1125(c),
requires “use of a mark or trade name in commerce.” Claim 5, under the Texas Anti-Dilution
statute, also requires a person’s “commercial use of a mark or trade name.” Tex. Bus. &
Com. Code Ann. § 16.103 (West 2017). Claim 6, for common law trademark infringement,
similarly requires that the defendant use the trademark. See GoForIt Entm’t, LLC v.
DigiMedia.com L.P., 750 F.Supp.2d 712, 733 (N.D. Tex. 2010) (Fitzwater, C.J.) (citing All
Am. Builders, Inc. v. All Am. Siding of Dall., Inc., 991 S.W.2d 484, 488 (Tex. App. 1999, no
pet.)) (“The issues in a common law trademark infringement action under Texas law are no
different than those under federal trademark law.”). Claim 7, for common law unfair
competition, requires the showing of an illegal act by Springboards. See Taylor Pub. Co. v.
Jostens, Inc., 216 F.3d 465, 486 (5th Cir. 2000).
6

Exhibit E of Springboards’ complaint contains Grainger’s website in the results for
a search based on the terms “lab safety supply inc” and “upstart activity guide.” P. Ex. E.
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of Springboards’ trademarks in commerce.
B
Grainger also contends that Springboards has failed to adequately plead that
Grainger’s use of the trademark “is likely to cause confusion.”7 Mot. at 14. But Grainger
provides no explanation for why the use of the phrase “Million Dollar Reader” in a variety
of Upstart products would not cause confusion regarding Springboards’ relationship to such
products. P. Ex. C, D. Accordingly, the court holds that Springboards has plausibly pleaded
this element of its claims.8
IV
The court now turns to Grainger’s argument that Springboards’ complaint should be
dismissed because all claims against Grainger are barred by the applicable statute of
limitations.
Grainger maintains that the complaint limits its liability to the period of time before
it sold the assets of Highsmith to Demco.9 And because Demco acquired all of the Highsmith
7

For example, a cause of action under 15 U.S.C. § 1441 requires that “such
[infringing] use is likely to cause confusion, or to cause mistake or to deceive.” Bos. Prof’l
Hockey Ass’n, Inc. v. Dall. Cap & Emblem Mfg., Inc., 510 F.2d 1004, 1009-10 (5th Cir.
1975).
8

Because the court holds that Springboards has plausibly pleaded Grainger’s use of
the allegedly infringing trademark, it does not reach Springboards’ contention that the
parties’ January 24, 2017 stipulation bars Grainger’s argument about the sufficiency of
Springboards’ pleadings.
9

The complaint alleges that “Grainger is liable to Springboards to Education for all
infringing products marketed, disseminated, or sold by Grainger after its merger / acquisition
of Lab Safety Supply, Inc. and Highsmith and before it sold the assets of Highsmith to
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assets on December 20, 2010, the alleged infringement for which it is liable falls outside the
applicable two or four year statute of limitations.10
“[A] complaint that shows relief to be barred by an affirmative defense, such as the
statute of limitations, may be dismissed for failure to state a cause of action, pursuant to Rule
12(b)(6).” Patton v. Fujitsu Tech. Sols., Inc., 2002 WL 31498996, at *2 (N.D. Tex. Nov. 7,
2002) (Fish, C.J.) (citing J.M. Blythe Motor Lines Corporation v. Blalock, 310 F.2d 77, 78
(5th Cir. 1962)) (noting that defense may be raised where complaint “affirmatively” shows
claim is barred).
[But] because an adequately stated claim may be supported by
showing any set of facts consistent with the allegations in the
complaint, dismissal for failure to state a claim based on the
statute of limitations defense should be granted only when the
plaintiff’s potential rejoinder to the affirmative defense was
foreclosed by the allegations in the complaint.
Jaso v. The Coca Cola Co., 435 Fed. Appx. 346, 352 (5th Cir. 2011) (per curiam) (citation
and internal quotation marks omitted).

Demco.” 3d Am. Compl. ¶ 56.
10

Springboards’ first four claims under the Lanham Act are subject to a four year
statute of limitations. “The Lanham Act establishes no limitations period for claims alleging
unfair competition or false advertising.” Jaso v. The Coca Cola Co., 435 Fed. Appx. 346,
356 (5th Cir. 2011) (per curiam). “In Texas, a Lanham Act violation is governed by the four
year statute of limitations under Texas law.” Mary Kay, Inc. v. Weber, 601 F.Supp.2d 839,
859-60 (N.D. Tex. 2009) (Fish, J.) (citation and internal quotation marks omitted).
Springboards’ claim under the Texas Anti-Dilution statute and its common law claims are
governed by a two year statute of limitations. See Procter & Gamble Co. v. Amway Corp.,
80 F.Supp.2d 639, 657 (S.D. Tex. 1999) (holding two year statute of limitations period
applies to anti-dilution claims), aff’d in part, rev’d in part, 242 F.3d 539 (5th Cir. 2001); Tex.
Civ. Prac. & Rem. Code § 16.003 (West 2017).
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Grainger’s conduct, as alleged in the complaint, does not clearly fall outside the
limitations period. First, the complaint alleges that Grainger plays a role in the ongoing use
of Springboards’ trademark—use that continues after the acquisition of the Highsmith assets
by Demco. The allegations of ¶ 56 of the complaint do not indisputably limit Grainger’s
liability to infringement occurring while it owned Highsmith. It is not apparent from the face
of the complaint when the transfer of Highsmith occurred.11 Nor is it clear that all of the
divisions associated with allegedly infringing products transferred to Demco with the
Highsmith acquisition. Thus the complaint does not clearly show that Grainger’s allegedly
infringing conduct ceased at the time of the Highsmith acquisition. Because factual issues
regarding the statute of limitations defense remain, the court declines to dismiss
Springboards’ claims against Grainger on this ground. See, e.g., Chappell v. Goltsman, 186
F.2d 215, 218 (5th Cir. 1950) (“It is only on the basis of a showing that there is no genuine
issue of fact as to the existence of the affirmative defense that the court is authorized to
sustain the motion and dismiss the action on that ground.”).

11

Grainger maintains that Springboards has pleaded that the Highsmith acquisition
occurred in December 2010 because Springboards included the date in its motion for leave
to file a third complaint. Grainger also points to a press release attached to its response to
Springboards’ motion for leave, which states the date of the acquisition as December 20,
2010. Even if the court considers these documents, it cannot say that Springboards’
“potential rejoinder to the affirmative defense [is] foreclosed by the allegations in the
complaint.” Jaso, 435 Fed. Appx. at 352.
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V
Finally, the court addresses Grainger’s contention that Springboards’ claims should
be dismissed because they constitute a “fishing expedition,” which the court should not
allow. Grainger bases its argument on Springboards’ statements in the complaint that
discovery is necessary to understand the precise relationship among LSS, Highsmith, and
Grainger, as well as the “full extent of Defendants’ infringing conduct.” 3d Am. Compl. 20,
¶ 73.
Grainger has failed to demonstrate that its motion to dismiss should be granted on this
ground where, as here, Springboards has plausibly pleaded its claims against Grainger and
merely suggests that it will later invoke the Rule 26 discovery process. See Rule 26(b)(1)
(“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any
party’s claim or defense and proportional to the needs of the case[.]”).
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The court denies Grainger’s motion to dismiss for failure to state a claim.
SO ORDERED.
December 5, 2017.

_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE

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