Jones v American Council on Exercise

Filing 105

ORDER GRANTING 60 MOTION for Leave to File Second Amended Answer.(Signed by Judge Gray H Miller) Parties notified.(rkonieczny, 4)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
MICHAEL JONES,
Plaintiff,
v.
AMERICAN COUNCIL ON EXERCISE ,
Defendant.

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April 03, 2017
David J. Bradley, Clerk

CIVIL ACTION H-15-3270

O RDER
Pending before the court is a motion for leave to file a second amended answer filed by
defendant American Council on Exercise (“ACE”). Dkt. 60. Having considered the motion,
response, reply, and the applicable law, the court is of the opinion that the motion should be
GRANTED.
I. BACKGROUND AND LEGAL STANDARD
Under the court’s scheduling order entered on April 11, 2016, amendments to pleadings were
due by September 14, 2016. Dkt. 17. ACE filed its motion to amend its answer on November 11,
2016. Dkt. 60. Because ACE is seeking leave to amend outside of the time permitted in the court’s
scheduling order, the court treats the motion to file an amended answer as a motion to amend the
scheduling order. Under Federal Rule of Civil Procedure 16(b)(4), a scheduling order may be
modified “only for good cause and with the judge’s consent.” Fed. R. Civ. P. 16(b)(4). The
discovery deadline was January 5, 2017. Id. “To show good cause, the party seeking to modify the
scheduling order has the burden of showing ‘that the deadlines cannot reasonably be met despite the
diligence of the party needing the extension.’” Squyres v. Heico Cos., L.L.C., 782 F.3d 224, 237 (5th

Cir. 2015) (quoting Filgueira v. U.S. Bank Nat’l Ass’n, 734 F.3d 420, 422 (5th Cir. 2013)). To
determine if there is good cause, the court must consider:
“(1) the explanation for the failure to timely [comply with the
scheduling order];
(2) the importance of the [modification];
(3) potential prejudice in allowing the [modification]; and
(4) the availability of a continuance to cure such prejudice.”
Id. (quoting Meux Surface Prot., Inc. v. Fogleman, 607 F.3d 161, 167 (5th Cir. 2010)).
II. ANALYSIS
ACE seeks to clarify its Ninth Specially-Pleaded Defense to show that it is based in part on
Jones’s naked licensing of the alleged mark. Dkt. 60. The current defense states: “Jones’s purported
trademark is invalid for lack of distinctiveness and/or secondary meaning.” Dkt. 18 at 8. The
proposed amended version of this defense reads as follows:
Jones’s purported trademark is invalid for lack of distinctiveness
and/or secondary meaning. For example and not by way of
limitation, even if Jones’ purposed trademark was not a common
descriptive term (i.e., generic and unprotectable) but rather was
merely descriptive such that it could have acquired secondary
meaning, which ACE denies, Jones’ uncontrolled licensing of, and/or
uncontrolled grants of consent to, third-parties to use the purported
trademark would have prevented it from ever acquiring secondary
meaning and becoming distinctive, or, alternatively, would have
caused the purported trademark to lose any distinctiveness it might
have had as an indicator of origin.
Dkt. 60, Ex. A.
A.

Explanation of Timing
ACE’s explanation for the timing of the motion is that it reasonably understood its existing

pleading to already encompass naked licensing because naked licensing is merely an argument
against distinctiveness. Dkt. 60. ACE contends that the motion to amend “was triggered by a
footnote in the Court’s summary judgment ruling” that indicated that ACE had not specifically pled
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“naked licensing” as a defense. Id. (citing Dkt. 58 n.1 (order on the motion for summary judgment)).
ACE asserts that the court’s footnote put it on notice that its failure to mention naked licensing in
its answer may be an issue. Id. It contends that it filed the motion to amend to address that potential
issue. Id.
Jones contends that ACE’s live pleading does not assert a naked licensing through
abandonment defense, and that this defense is an affirmative defense on which ACE would bear the
burden of proof. Dkt. 61. Jones argues that an affirmative defense must be pled with enough
particularity to give the plaintiff fair notice and that the current defense, which contains no facts to
support a claim of abandonment, does not do so. Id. (citing Woodfield v. Bowman, 193 F.3d 354,
362 (5th Cir. 1999) (requiring an affirmative defense to give fair notice)). Moreover, Jones points
out that ACE actually stated in its reply to its motion for summary judgment that this is not an
abandonment case. Id.; see Dkt. 44 (“This is not an abandonment case; the rights never accrued due
to naked licensing, and Jones failed to meet his burden to prove otherwise.”).
ACE does not explain in its reply to this motion why it stated in its reply to its motion for
summary judgment that this is “not an abandonment case” yet now wishes to add that claim to its
amended answer. See Dkt. 64.
The court finds that this factor weighs in favor of Jones. While the court understands ACE’s
contention that it was recently put on notice that its failure to pled naked licensing could be an issue,
there is not an excuse for its failure to survey caselaw prior to the amendment deadline, which also
would have put ACE on notice that this could be an issue.
B.

Importance of Amendment
ACE contends that the amendment is important to the extent the court deems it a predicate

to its naked licensing arguments. Dkt. 60. Jones contends that “abandonment by naked licensing”
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is an affirmative defense “on which ACE unquestionably bears the burden of proof under Fifth
Circuit law.” Dkt. 61 (citing Exxon Corp. v. Oxxford Clothes, 109 F.3d 1075, 1075–76 (5th Cir.
1997) (stating that the party attempting to show abandonment bears the burden)). ACE argues that
because Jones’s trademark is not registered, he bears the burden of proving distinctiveness or
secondary meaning. Dkt. 60. ACE asserts that the term never acquired distinctiveness because
Jones did not exercise sufficient control over the mark’s use and that the naked licensing defense is
thus used, in this case, to point out Jones’s inability to meet his burden. Id. ACE asserts that its
argument “is directed to an issue on which Jones bears the burden of proof [and] is [thus] not an
‘affirmative’ defense on which ACE bears the burden of proof.” Id.
Federal Rule of Civil Procedure 8(c) requires parties to “affirmatively state any avoidance
or affirmative defense.” Fed. R. Civ. P. 8(c). “An avoidance in pleadings is an ‘allegation or
statement of new matter, in opposition to a former pleading, which, admitting the facts alleged in
such former pleading, shows cause why they should not have their ordinary legal effect.’” Simon
v. United States, 891 F.2d 1154, 1157 (5th Cir. 1990) (quoting Ingraham v. United States, 808 F.2d
1075, 1079 (5th Cir. 1987)). Generally, a party must raise its affirmative defenses in its first
responsive pleading. Pasco ex rel. Pasco v. Knoblauch, 566 F.3d 572, 577 (5th Cir. 2009).
“However, ‘[w]here the matter is raised in the trial court in a manner that does not result in unfair
surprise . . . technical failure to comply precisely with Rule 8(c) is not fatal.’” Id. (quoting Allied
Chem. Corp. v. Mackay, 695 F.2d 854, 855–56 (5th Cir. 1983)). The defense is thus not waived if
it is raised “at a pragmatically sufficient time” so that the plaintiff is not prejudiced. Id.
The court finds that the naked licensing defense must be affirmatively pled. According to
the Fifth Circuit, “the proponent of a naked license theory ‘faces a stringent standard’ of proof.’”
Moore Bus. Forms, Inc. v. Ryu, 960 F.2d 486, 489 (5th Cir. 1992). While ACE “continues to assert
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that this is not an abandonment case,” it wishes to maintain the ability, should “Jones somehow
prove[] his alleged mark ever was distinctive,” “to show the actual effect of that naked licensing.”
Dkt. 64 at 2 n.1. Thus, ACE wishes to avoid the “ordinary legal effect” of Jones’s potential showing
of distinctiveness with its naked licensing defense. See Simon, 891 F.2d at 1157 (defining
“avoidance”).
Because the court has determined the defense must be pled, it is an important amendment.
This factor weighs in favor of ACE.
C.

Potential Prejudice in Allowing the Amendment
ACE contends that its defense of failure to accrue rights through naked licensing is

encompassed in its currently pled Ninth Defense and that the facts needed to prove failure to accrue
rights and abandonment via naked licensing are the same. Dkt. 64. It argues that because the facts
are the same, Jones will not suffer any prejudice in allowing the amendment. Id. Moreover, it notes
that Jones was already aware of and has responded to the naked licensing arguments. Dkt. 60.
Jones contends, conversely, that granting leave to amend would cause him substantial
prejudice. Dkt. 61. He asserts that he relied on ACE’s representation in its summary judgment reply
that this was not an abandonment case and thus has not pursued any discovery related to that defense.
Id. He argues that a “new naked licensing defense threatens to push discovery far beyond the bounds
of what is reasonable.” Id. He notes that, at the time he responded to the motion, discovery was
“coming to a close in a matter of weeks.” Id. Jones contends he did not have the opportunity to
determine if he needed to retain an expert on this issue and that the expert deadline had already
passed. Id. Additionally, he argues that exploring this argument would require substantial discovery
from third parties, which could not be obtained prior to the close of discovery. Id.

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ACE argued in its motion for summary judgment, which was filed on June 16, 2016, that
Jones “nakedly bestow[ed] his graduates with the title ‘Medical Exercise Specialist’ with no controls
and no license agreement.” Dkt. 27. In the summary of the argument, ACE stated, “[t]o the extent
plaintiff still somehow attempts to assert service mark rights, that claim is foreclosed due to
plaintiff’s rampant, uncontrolled naked licensing.” Id. at 2. ACE discussed in the naked licensing
argument section of the brief how Jones responded to its questioning during his deposition related
to the controls Jones placed or failed to place on the use of the title. Id. at 8–9. Later in the brief,
ACE discussed its contention that Jones had no mark because he “failed to control the quality of
services provided under his alleged mark in granting and failing to police naked licenses, such that
the term he contends he owns has lost any significance it might have otherwise allegedly had as a
source-indicating mark.” Id. at 23. There is an entire paragraph in the brief about abandonment, and
ACE stated that in this case “there is literally no control whatsoever over what others sell under
Jones’s purported mark after he awards them the right to use it as their ‘title.’” Id. at 24.
In Jones’s response to ACE’s motion for summary judgment, Jones argued that he
“monitored usage of his mark and it retains source identifying significance.” Dkt. 37 at 3. He
argued that he “exercises direct and exclusive control over the quality of the products he services and
offers” and that “consumers who sign up can expect a consistent level of quality.” Id. at 23. Jones
offered a declaration about how he exercises control over who may use the title. Id. at 23–24 &
Ex. 1C.
In the reply, filed July 12, 2016, ACE stated, as Jones points out, that “[t]his is not an
abandonment case.” Dkt. 44. It ended that statement with a semi-colon and then argued that “the
rights never accrued due to naked licensing, and Jones failed to meet his burden to prove otherwise.”
Id.
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Jones did not argue in his response to the motion for summary judgment that ACE failed to
plead naked licensing and could not now assert it. Instead, Jones presented arguments and evidence
to rebut the claim. And the court found that Jones had sufficiently shown there was an issue of
material fact as to whether ACE could meet the requirements of showing Jones had abandoned its
mark. Dkt. 58 at 46. Thus, notwithstanding ACE’s statement in its reply that this is not an
abandonment case, the court interpreted ACE’s arguments in its motion as asserting abandonment,
and Jones, having replied to the arguments and having been quizzed about abandoning his mark
during his deposition, cannot now claim he is unfairly surprised by the defense.
Notwithstanding Jones’s argument of prejudice, the court believes ACE’s exploration of the
defense during Jones’s deposition and its express arguments relating to the defense in its motion for
summary judgment were sufficient to put Jones on notice that ACE would be pursuing the argument.
The court finds the statement about this not being an abandonment case in the reply as an indication
that abandonment was not ACE’s primary argument, not as an indication that ACE was abandoning
the defense altogether. The court ruled on the motion for summary judgment on October 18, 2016,
and addressed ACE’s abandonment argument, ruling that there was a question of material fact. The
written discovery deadline did not pass until January 5, 2017, and depositions did not have to be
completed until March 6, 2017. Dkt. 72. While Jones’s expert designations were due November
1, 2016 (see Dkt. 17), Jones could have easily requested an extension after reviewing the court’s
order on the motion for summary judgment.
This factor weighs in favor of ACE.
D.

Availability of a Continuance
The court is not convinced that Jones will be prejudiced by the amendment. However, if

Jones truly believes he needs an expert to rebut the defense at trial, the court will be willing to
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consider a very brief extension for Jones to designate an expert for this very narrow issue, file a
report, and for ACE to conduct a brief deposition of the expert.1 The court believes Jones had
sufficient notice of this issue, so if Jones still believes he needs additional discovery to cure
prejudice, he must make the case for such extremely narrowly tailored discovery. The court will
entertain a brief on this issue so long as Jones files it within five (5) days of the date of this order.
The brief shall consist of no more than three (3) pages. ACE may file a response five (5) days after
Jones’s brief. It shall also be confined to three (3) pages or less. No replies will be accepted.
III. CONCLUSION
The court finds that the factors weigh in favor of ACE. ACE’s motion to amend (Dkt. 60)
is therefore GRANTED.
Signed at Houston, Texas on April 3, 2017.

___________________________________
Gray H. Miller
United States District Judge

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The court notes that Jones pointed out in his response to the motion to amend that neither
ACE nor Jones has requested a continuance. Dkt. 61 at 8. Thus, Jones may not actually desire a
continuance to obtain an expert, in which case he may simply disregard the court’s instructions to
submit a brief.
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