H-D USA LLC et al v. SunFrog LLC et al
Filing
40
ORDER signed by Judge J.P. Stadtmueller on 10/4/2017 DENYING 27 Defendant's Motion to Dismiss. (cc: all counsel) (jm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
H-D U.S.A., LLC and HARLEYDAVIDSON MOTOR COMPANY
GROUP, LLC,
Case No. 17-CV-711-JPS
Plaintiffs,
v.
SUNFROG, LLC d/b/a SUNFROG
SHIRTS and JOHN DOES,
Defendants.
ORDER
This is a trademark infringement case brought by Plaintiffs,
collectively referred to as “Harley-Davidson,” against Defendants,
collectively referred to as “SunFrog.” SunFrog runs an online marketplace
where third-party sellers can upload designs and logos onto clothing, hats,
mugs, or other items and sell them. SunFrog prints and ships the purchased
items. Some of those items bore Harley-Davidson logos and word
trademarks, and Plaintiffs filed this lawsuit as a result.1 Before the Court is
SunFrog’s motion to dismiss the complaint for failure to state a claim upon
which relief may be granted. (Docket #27). For the reasons stated below, it
will be denied.
1.
LEGAL STANDARD
Federal Rule of Civil Procedure 12(b) provides for dismissal of
complaints which fail to state a viable claim for relief. Fed. R. Civ. P.
The Court has enjoined SunFrog from any further infringement pending
final resolution in this matter. See H-D U.S.A., LLC v. SunFrog, LLC, Case No. 17CV-711-JPS, 2017 WL 3261709 (E.D. Wis. July 31, 2017).
1
12(b)(6). To state a claim, a complaint must provide “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R.
Civ. P. 8(a)(2). In other words, the complaint must give “fair notice of what
the. . .claim is and the grounds upon which it rests.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). The allegations must “plausibly suggest
that the plaintiff has a right to relief, raising that possibility above a
speculative level[.]” Kubiak v. City of Chicago, 810 F.3d 476, 480 (7th Cir. 2016)
(citation omitted). In reviewing the complaint, the Court is required to
“accept as true all of the well-pleaded facts in the complaint and draw all
reasonable inferences in favor of the plaintiff.” Id. at 480–81.
2.
RELEVANT FACTS
The facts as pleaded can be briefly summarized. Harley-Davidson is,
of course, a world-famous motorcycle manufacturer, and its word
trademarks and logos are well known. Harley-Davidson prints those logos
and marks on merchandise it sells alongside its automotive products. Those
logos and word marks have appeared on goods sold on SunFrog’s website,
including clothing and other items. These are counterfeits, as none of them
is sponsored by or affiliated with Harley-Davidson.
Users of SunFrog’s website create and sell these counterfeit goods
either by uploading their own designs featuring Harley-Davidson’s marks
and logos onto blank versions of the goods in question (supplied by
SunFrog), or by selecting an infringing design created by another user
which is stored in the SunFrog art database. SunFrog users are largely
anonymous, as they are identified on the website only by self-made account
names or numerical codes that do not reveal the user’s identity. Once a
buyer actually purchases one of the user’s infringing designs, SunFrog
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prints the item using an automated printer and then ships it. SunFrog also
keeps the majority of the profit from the sales.
SunFrog advertises these products on the Internet and through social
media outlets. Further, it encourages users to track sales using its salestracking tools and to advertise their goods on social media. SunFrog
persists in promoting and selling these goods despite receiving numerous
takedown requests and other notifications from Harley-Davidson that
infringement is occurring. Indeed, “[f]rom at least as early as October 2016
to the present, H-D has submitted more than 70 complaints to SunFrog that:
(a) notified SunFrog of H-D’s rights in the H-D Marks, and (b) reported and
objected to more than 800 Infringing Products that have been advertised,
promoted, offered, and/or sold on SunFrog’s Website in violation of H-D’s
rights.” (Docket #1 ¶ 68). Moreover, even when SunFrog would try to
control infringement by users, its attempts were halfhearted: it would take
a long time for infringing designs to be taken down in response to requests
for the same, those same designs would crop up again soon after because
there was no system in place to curb infringement at the design stage, and
repeat infringers would pop up again and again with few or no
repercussions.
Harley-Davidson claims that “SunFrog is thus not a passive
participant in the business conducted by sellers on and through SunFrog’s
Website.” Id. ¶ 64. According to Harley-Davidson, “[t]his is not a situation
where SunFrog’s only role is to provide sellers with access to an online
marketplace to sell their products and everything is done by the sellers.
Rather, SunFrog is an active partner of the sellers and directly involved in
the sellers’ business in many ways, all for SunFrog’s financial gain[.]” Id.
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The complaint recites claims for: (1) trademark counterfeiting under
15 U.S.C. § 1114(1); (2) trademark infringement under 15 U.S.C. § 1114(1);
(3) trademark infringement, false designation of origin, and unfair
competition under 15 U.S.C. § 1125(a)(1)(A); (4) trademark dilution under
15 U.S.C. § 1125(c); (5) copyright infringement under 17 U.S.C. § 101 et seq.;
(6) trademark infringement under Wis. Stat. § 132 et seq.; and (7) common
law trademark infringement, unfair competition, and misappropriation. See
(Docket #1 at 38–45).
3.
ANALYSIS
SunFrog does not contest that its users’ conduct constitutes
infringement of Harley-Davidson’s intellectual property rights. Rather, its
motion focuses on why it should not be responsible for this rampant
infringement. First, says SunFrog, it does not itself create infringing
designs. (Docket #28 at 6). Second, it cannot be expected to review the
millions of designs presently on its website and the thousands more added
each day. Id. Third, it has made efforts to curb infringement, including
requiring users to check a box stating that they are not violating the
intellectual property rights of others when they submit a design. Id.
SunFrog claims that it will terminate users who renege on this promise. Id.
Further, SunFrog claims that in light of its explosive growth and the
concerns over potential infringement, it is all the time developing and
refining tools that can be used to search its database for infringing goods
and remove them, including responding to takedown notices, permitting
rights holders like Harley-Davidson to directly search its design databases
to identify problematic offerings, and diverting profits from infringing
goods to the rights holders. Id. at 6–7.
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SunFrog raises four grounds for dismissal, none of which has merit.
First, it claims that Harley-Davidson has not alleged facts that plausibly
support their seven claims for relief. Id. at 7–8. The problem with the
argument, however, is that SunFrog does no more than state this
conclusion. See id. SunFrog cites a host of cases about the plausibility
pleading regime and its application in intellectual property cases, but omits
the critical link between those legal principles and any of the facts alleged
in the complaint. Why does SunFrog think that Harley-Davidson’s
complaint—which is lengthy, detailed, and specific—is so conclusory as to
be worthy of dismissal? It does not say. To the extent that SunFrog believes
that the burden here shifted to Harley-Davidson once it invoked the word
“plausibility,” see (Docket #37 at 4), it is mistaken, Yeksigian v. Nappi, 900
F.2d 101, 104 (7th Cir. 1990); Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406,
1409 (3d Cir. 1991). The Court is not required to develop SunFrog’s
arguments on its behalf, and so the point need not be addressed further. See
Hardrick v. City of Bolingbrook, 522 F.3d 758, 762 (7th Cir. 2008); Spath v. Hayes
Wheels Int'l–Ind., Inc., 211 F.3d 392, 397 (7th Cir. 2000) (“[I]t is not this court’s
responsibility to research and construct the parties’ arguments.”)
(quotation omitted).2
Only in its reply did SunFrog find it prudent to mount some specific
attacks against Harley-Davidson’s claims. See (Docket #37 at 2–14). Those
arguments are extensive and rely in large measure on a seminal case from the
Second Circuit, Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93, 102 (2d Cir. 2010), as well
as authorities defining the scope of contributory trademark and copyright
infringement, see (Docket #37 at 11–16). They deserve only passing mention,
however, since raising them for the first time in a reply means the arguments are
waived. Studio & Partners v. KI, No. 06–C–0628, 2008 WL 426496, at *6 (E.D. Wis.,
Feb. 14, 2008) (“[I]t should go without saying that a reply brief [] is hardly the
correct vehicle for raising new arguments[.]”) (citing TAS Distrib. Co., Inc. v.
Cummins Engine Co., Inc., 491 F.3d 625, 630–31 (7th Cir. 2007)); James v. Sheahan, 137
2
Page 5 of 13
Second, SunFrog contends that, as a mere printer of goods bearing
Harley-Davidson’s marks, it has not used the marks in commerce as
required to sustain a claim under federal or Wisconsin trademark law. Id.
at 8–9. As the Court observed in its ruling on Harley-Davidson’s motion for
preliminary injunction, SunFrog cites no case that colorably supports its
position. H-D U.S.A., LLC v. SunFrog, LLC, Case No. 17-CV-711-JPS, 2017
WL 3261709, at *2 n.1 (E.D. Wis. July 31, 2017). Instead, SunFrog directs the
F.3d 1003, 1008 (7th Cir. 1998) (“Arguments raised for the first time in a reply brief
are waived.”). This tactic is proscribed because it deprives the non-movant of the
ability to challenge arguments that could have been made in the opening brief,
and deprives the Court of the benefit of each side’s views on a given argument.
Additionally, SunFrog’s contention that Harley-Davidson’s claims are
premised on speculation is, in the main, just a repackaging of its other arguments
pertaining to use in commerce, innocent printers, and the like. Those matters are
discussed further herein, so the Court need not separately address them here.
Moreover, to the extent SunFrog wants to raise its own facts to defeat HarleyDavidson’s, that must await summary judgment. See Kubiak, 810 F.3d at 480–81.
Finally, for reasons similar to those given below in relation to Henderson v.
eBay, Inc., 165 F. Supp. 2d 1082, 1094 (C.D. Cal. 2001), the Court does not find that
the Second Circuit’s Tiffany decision is apposite. There, eBay claimed it never saw
or inspected allegedly infringing goods offered for sale through its online
marketplace, nor could it know whether certain goods offered were actual
counterfeits rather than merely resales. Tiffany, 600 F.3d at 102. Here, however,
SunFrog operates the very printers that print infringing goods, and it does not
appear to offer resale of goods. Its claim to innocence is far more tenuous than
eBay’s. Indeed, eBay would have been hard-pressed to defend itself from Tiffany
if eBay not only provided a platform for the sale of counterfeit lamps but also ran
the leaded-glass shop that made them. See also Tre Milano, LLC v. Amazon.Com, Inc.,
B234753, 2012 WL 3594380, at *11 (Cal. Ct. App. Aug. 22, 2012) (absolving Amazon
in hosting sellers of counterfeit goods “because Amazon is a service provider, not
the seller. Amazon did not currently have any [infringing goods] in its own
inventory; those it sold belonged to third party sellers. That Amazon provided the
product description and handled the payments did not make it a direct seller of
the products.”); Milo & Gabby, LLC v. Amazon.com, Inc., No. C13–1932RSM, 2015
WL 4394673, at *8–9 (W.D. Wash. July 16, 2015). Consequently, no matter how
robust may be SunFrog’s screening and takedown procedures, they do not compel
dismissal of the complaint at this early stage.
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Court to one 20-year-old case in which Harley-Davidson chose not to sue a
printer of infringing goods and implies that such a claim must not be
available under the Lanham Act. (Docket #28 at 8–9) (citing HarleyDavidson, Inc. v. Selectra Int’l Designs, Ltd., 855 F. Supp. 275, 278 (E.D. Wis.
1994)).
As it explained in its earlier decision, the Court is not convinced, and
the reason for this is related to another of SunFrog’s arguments: that it
cannot be liable for monetary damages because it is an “innocent infringer”
as provided in 15 U.S.C. § 1114(2)(A). (Docket #28 at 11–13). That Section
provides:
Where an infringer or violator is engaged solely in the
business of printing the mark or violating matter for others
and establishes that he or she was an innocent infringer or
innocent violator, the owner of the right infringed or person
bringing the action under section 1125(a) of this title shall be
entitled as against such infringer or violator only to an
injunction against future printing.
15 U.S.C. § 1114(2)(A). Section 1114(2)(A) contemplates that injunctive relief
is available to prevent future printing of infringing goods, meaning that
Congress intended that an infringement action could lie directly against a
printer. Indeed, because this provision supplies a defense to monetary
damages only, the unavoidable conclusion is that even an innocent printer
of infringing goods may be liable for infringement and can be enjoined from
future infringement. Nat’l Bus. Forms & Printing, Inc. v. Ford Motor Co., 671
F.3d 526, 536 n.7 (5th Cir. 2012); Lockheed Martin Corp. v. Network Solutions,
Inc., 194 F.3d 980, 985 (9th Cir. 1999); Barrios v. Am. Thermal Instruments, Inc.,
712 F. Supp. 611, 620 (S.D. Ohio 1988); Gianni Versace SPA v. Awada, Case
No. CV 03-3254 GPS(RNBx), 2008 WL 11338774, at *1 (C.D. Cal. Mar. 25,
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2008). In this case, Harley-Davidson has alleged that SunFrog uses its marks
in commerce by publishing them on its website and in advertising and by
printing the marks on goods and shipping them. (Docket #34 at 9). No more
is required at this juncture.
This conclusion dovetails into SunFrog’s argument that it should be
protected from monetary damages on the trademark claims as an innocent
infringer. (Docket #28 at 11–13). Here, SunFrog’s point seems to be that
because its automated printers print goods at users’ requests, without any
involvement from SunFrog employees directly, it is not aware of
infringement until such activity is brought to its attention later. Id. at 12.
This argument flies in the face of the facts alleged. Harley-Davidson
has asserted that SunFrog knows that its users infringe others’ intellectual
property rights, that it promotes this infringement throughout Internet
advertising, that it facilitates the infringement by printing and shipping the
goods, and that it does this to generate profit from the sales. It thus appears
that SunFrog does far more than a mere on-demand printer. See K&N Eng’g,
Inc. v. Bulat, 259 F. App’x 994, 995 (9th Cir. 2007) (because the defendants
advertised and sold infringing goods rather than advertising and selling
printing services, “they were not engaged solely in the business of printing
the mark or violating matter for others, and thus were [not] innocent
infringers”).
Drawing inferences from the facts in Harley-Davidson’s favor, it is
easily said that whatever the size or scope of SunFrog’s business, it can be
charged with knowing what goods come off of printers that it owns and
operates. If the statute’s reference to “innocence” means, as SunFrog
contends, that only knowing or reckless infringement is actionable, HarleyDavidson’s allegations suffice. See World Wrestling Fed’n, Inc. v. Posters, Inc.,
Page 8 of 13
No. 99 C 1806, 2000 WL 1409831, at *3 (N.D. Ill. Sept. 26, 2000).3 At a
minimum, failing to police one’s own manufacturing process can be viewed
as reckless disregard for whether infringement is occurring. See id.
Put differently, SunFrog equates itself with a vending machine,
producing products at a customer’s order without oversight. (Docket #28 at
13). But the point of this case is that SunFrog in fact operates like a selfaware vending machine, with the ongoing ability to monitor the products
its users order (and that it creates) and to know that those products are
infringing. This is enough to pass the pleading phase. The Court will not
dismiss any of Harley-Davidson’s claims for monetary damages.4
Finally, SunFrog claims that it is protected from Harley-Davidson’s
copyright claim by the safe-harbor provisions of the Digital Millennium
Copyright Act (“DMCA”), 17 U.S.C. § 512. SunFrog asserts that it is an
Harley-Davidson, relying on a more recent case from the Fifth Circuit,
says that the standard for assessing innocence should not be actual malice but the
objective reasonableness of the accused infringer’s actions. (Docket #34 at 15); Dial
One of the Mid-S., Inc. v. BellSouth Telecomm., Inc., 269 F.3d 523, 525–27 (5th Cir.
2001). Applying this much lower standard would further undermine what appears
to be SunFrog’s “ostrich” defense in this case. See 4 McCarthy on Trademarks and
Unfair Competition § 25:29 (4th ed.). The Court need not yet decide who is right
on this point, as SunFrog’s argument fails even if the Court applied the actual
malice standard.
3
This sort of argument seems to encapsulate SunFrog’s whole approach to
this case: that its business model cannot be sustained if it is required to monitor
and control infringement in the way Harley-Davidson requests. Certainly, the
measures Harley-Davidson seeks to impose may detract from SunFrog’s bottom
line. But the Court cannot tarry over such concerns, as its task is to determine
whether SunFrog has infringed others’ intellectual property rights. Whether
SunFrog can practically and profitably adapt its business model to avoid
infringement is a matter entirely committed to SunFrog. See Ohio State Univ. v.
Skreened Ltd., 16 F. Supp. 3d 905, 916–18 (S.D. Ohio 2014) (“Selling knockoffs is
selling knockoffs, regardless of who suggested you sell them, regardless of how
many other infringing products you decide not to sell, and regardless of how much
of a hassle it is to comply with the law.”).
4
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Internet service provider (“ISP”) and that, as such, it is not liable for
copyright infringement
by ‘referring or linking users to an online location containing
infringing material’ if it meets certain conditions—it doesn’t
know the material is infringing, it isn’t aware of facts that
would make the infringement apparent, upon learning such
facts it acts expeditiously to remove or disable access to the
infringing material, it doesn’t receive a financial benefit
directly attributable to the infringing activity, 17 U.S.C. §
512(d), and it terminates repeat infringers.
Flava Works, Inc. v. Gunter, 689 F.3d 754, 758 (7th Cir. 2012) (quoting 17
U.S.C. § 512(i)(1)(A)); see also In re Aimster Copyright Litig., 252 F. Supp. 2d
634, 661 (N.D. Ill. 2002), aff’d, 334 F.3d 643 (7th Cir. 2003). According to
SunFrog, it is not responsible for its users’ copyright infringement because
it does not generate those designs and it takes them down when notified.
(Docket #28 at 11).
This argument does not suffice to warrant dismissal of the copyright
claim. The DMCA safe-harbor provisions represent an affirmative defense
to be pleaded and proved by SunFrog. Mavrix Photographs, LLC v.
LiveJournal, Inc., 853 F.3d 1020, 1027 (9th Cir. 2017). Consequently, the
argument can only succeed on a motion to dismiss “if the defense appears
on the face of the complaint,” meaning that “the complaint itself must
establish the facts necessary to sustain defendant’s defense.” BWP Media
USA Inc. v. Hollywood Fan Sites, LLC, 69 F. Supp. 3d 342, 358 (S.D.N.Y. 2014).
As the Seventh Circuit has explained, a plaintiff need not anticipate
defenses at all; indeed, “[o]nly when the plaintiff pleads itself out of court—
that is, admits all the ingredients of an impenetrable defense—may a
complaint that otherwise states a claim be dismissed under Rule 12(b)(6).”
Xechem, Inc. v. Bristol-Myers Squibb Co., 372 F.3d 899, 901 (7th Cir. 2004).
Page 10 of 13
SunFrog has not met its burden to establish that Harley-Davidson
pled itself out of court on the DMCA safe harbor defense. Indeed, HarleyDavidson’s allegations, liberally construed as required by the standard of
review, refute each element of that defense. On the face of HarleyDavidson’s complaint, it appears that SunFrog actually knows that its users
create and that it prints and sells infringing material. SunFrog continues to
permit this to occur because it is profitable. Further, SunFrog drags its feet
in responding to takedown notices, and its takedown efforts have little
lasting effect.
Finally, and perhaps most importantly, SunFrog has the ability to
control the infringing activity. Because SunFrog indisputably receives a
direct financial benefit from that activity, it must demonstrate that it does
not have the right or ability to control the infringing activity to fall within
the safe harbor. 17 U.S.C. § 512(d)(2). While SunFrog might complain that
it lacks the practical means to monitor all design creation and printing for
infringement, it built and operates both the platform and the production
line in which infringement occurs.
This case is thus unlike Henderson v. eBay, Inc., 165 F. Supp. 2d 1082,
1094 (C.D. Cal. 2001), in which eBay sought protection under the DMCA
safe harbor. The court found that eBay’s ability to control infringement was
not established merely because it could remove infringing listings after
receiving a takedown notice. Id. Critical to the court’s analysis was the fact
that eBay had no involvement in consummating the transaction involving
the infringing goods, other than providing a platform for the buyer and
seller to interact. Id. The court observed that
[u]nlike a traditional auction house, eBay is not actively
involved in the listing, bidding, sale and delivery of any item
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offered for sale on its website. eBay’s evidence shows that it
does not have any control over the allegedly infringing
items—the pirated films. The evidence also shows that eBay
never has possession of, or opportunity to inspect, such items
because such items are only in the possession of the seller.
When auctions end, eBay’s system automatically sends an
email to the high bidder and the seller identifying each other
as such. After that, all arrangements to consummate the
transaction are made directly between the buyer and seller.
eBay has no involvement in the final exchange and generally
has no knowledge whether a sale is actually completed
(i.e., whether payment exchanges hands and the goods are
delivered). If an item is sold, it passes directly from the seller
to the buyer without eBay's involvement. eBay makes money
through the collection of an “insertion fee” for each listing and
a “final value fee” based on a percentage of the highest bid
amount at the end of the auction.
Id. SunFrog’s business model is quite unlike eBay’s: SunFrog promotes
infringing designs created by its users, it has possession of and an
opportunity to inspect the goods it prints before shipment, and it knows
that purchases of infringing goods are consummated because it actually
prints and ships the goods to the buyer. In contrast to eBay, SunFrog is
intimately—indeed indispensably—involved in transactions involving
infringing goods. Regardless of the ease of doing so, then, SunFrog has
“some ability to limit or filter copyrighted material.” (Docket #28 at 11)
(citing MGM, Inc. v. Grockster, 545 U.S. 913, 926 (2005)). As a result, the Court
finds that SunFrog has not sustained its claim to the DMCA safe harbor, at
least not on the allegations in the complaint.
4.
CONCLUSION
For the reasons stated above, the Court finds that SunFrog’s motion
to dismiss is wholly without merit. As such, it will be denied.
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Accordingly,
IT IS ORDERED that Defendant’s motion to dismiss (Docket #27)
be and the same is hereby DENIED.
Dated at Milwaukee, Wisconsin, this 4th day of October, 2017.
BY THE COURT:
__________________
J. P. Stadtmueller
U.S. District Judge
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