Diamond Assets LLC v. Device Cycles LLC et al

Filing 131

ORDER denying 17 Motion for Preliminary Injunction in case 3:20-cv-00534-wmc. Signed by District Judge William M. Conley on 4/11/2022. Associated Cases: 3:20-cv-00534-wmc, 3:20-cv-00969-wmc (jls)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
DIAMOND ASSETS LLC,
Plaintiff,

OPINION AND ORDER

v.

20-cv-534-wmc

DEVICE CYCLES LLC, E-TECH ASSET, LLC,
E-TECH ASSETS, LLC and MICHAEL SANTOS
(a/k/a Michael Urcia),
Defendants.
In this civil lawsuit, plaintiff Diamond Assets LLC accuses defendant Device Cycles
LLC, its owner Michael Santos and related companies of trade dress infringement and
related claims. Before the court is plaintiff’s motion for preliminary injunction. (Dkt.
#17.) The court effectively denied that motion by declining to hold a hearing or otherwise
ruling on it, but issues this formal opinion and order explains its ruling and describes its
ongoing concerns with plaintiff’s claims in light of the upcoming dispositive motion
deadline.

FACTS
A. The Parties
At least since 2014, plaintiff Diamond Assets has engaged in the business of
purchasing, refurbishing and selling Apple® computing devices to schools and other
organizations. Defendant Device Cycles offers Apple® and Chromebook, HP, Lenove,
Acer, Asus (or in this case, by less expensive and portable computing devices competing
with Apple devices whether made by Google or Samsung) trade-in services to schools,

hospitals and other large organizations.

Defendant Michael Santos is the President and

CEO of Device Cycles and also known as “Michael Urcia.” Moreover, Santos has or had
a past ownership stake in defendants E-tech Asset, LLC and E-Tech Assets, LLC. 1 Finally,
although not a formally named defendant, Santos also was the owner of Alsan Marketing,
LLC, a former buyer of more than $1,000,000 in refurbished computer hardware from
plaintiff Diamond.

B. Competing Videos
Sometime before September 2019, Diamond Assets allegedly created an audiovisual
(“Diamond

Video”)

to

https://diamondassets.com.

advertise

its

services

on

Diamond’s

website,

Defendants purport to dispute this allegation (and other

allegations about the Diamond Video) based on a lack of information, although any
dispute is immaterial for the reasons described below. Diamond’s website is allegedly
hosted on a third-party computer located in the State of Wisconsin.
In particular, the Diamond Video emphasizes services aimed at “helping
organizations capture the residual value that exists in their current Apple® fleets of
equipment.” (Pl.’s PFOFs (dkt. #28) ¶ 5 (citing McKenna Decl. (dkt. #19) ¶ 6).) The
Diamond Video also features an audio transcript, narrated by various of Diamond’s

Plaintiff also brought suit against defendant E-Tech Asset LLC in this court for trademark and
trade dress infringement under federal and state law. Diamond Assets LLC v. E-Tech Asset LLC, No.
18-cv-568 (W.D. Wis. July 20, 2018). Moreover, the court granted a joint motion for preliminary
injunction (dkt. ##21, 22), and the parties subsequently settled that case resulting in plaintiff’s
claims being dismissed with prejudice (dkt. ##43, 44). Plaintiff filed a third lawsuit against Santos
and E-Tech Asset LLC for breach of the settlement agreement and unfair competition under
Wisconsin law. Diamond Assets LLC v. E-Tech Asset, LLC, No. 20-cv-969 (W.D. Wis. Dec. 21, 2020).

1

2

professional staff, including its three Business Development, Sales and Operations Vice
Presidents, each of whom explain parts of Diamond’s business process. Defendants do not
dispute that the Diamond Video described a process, but contend that the process is not
unique to Diamond.

Rather, defendants respond that “it is the same process or a

substantially similar process to those used by many tech device trade-in dealers.” (Defs.’
Resp. to Pl.’s PFOFs (dkt. #28) ¶ 6.)
The arguable uniqueness of Diamond’s business process appears to go to the heart
of the parties’ dispute. More specifically, the Diamond Video describes a “device recovery
process,” including Diamond’s “white glove pickup service” by an “asset recovery
specialist,” who is dispatched to the customer’s location.

The Diamond Video also

advertises Diamond’s receiving, tracking, and audit, grading and reconciliation processes.
Although Diamond Asset provided a transcript of this Video in support of its preliminary
injunction motion, defendants objected on foundation and authenticity grounds.
Regardless, the court reviewed the Video and, where relevant below, will address specific
language and segments of the video.
On September 23, 2019, defendant Device Cycles also posted a video on YouTube,
titled “About Us/Device Cycles/Education Video.” The Device Video remains available on
YouTube

as

of

the

date

of

this

https://www.youtube.com/results?search_query=device+cycles.

opinion

at

In that Video, Device

Cycles states that its services help organizations “capture [] the existing value of used
Apple® and Chromebook™ devices.” On September 30, 2019, Device Cycles posted the
competing Video on its Facebook page, where it also remains available for viewing as of

3

the date of this opinion and order. Similar to the Diamond Video, the Device Video
describes Device Cycles’ receiving, device tracking, audit, grading and reconciliation
processes. The audio script for the Device Video is narrated by Device Cycles’ Account
Manager and Chief Operating Officer. While plaintiff provided a transcript for this video
in support of its motion as well, defendants again objected based on foundation and
authenticity grounds. Because the court also reviewed this video, however, it will discuss
specific language and segments as relevant below.

C. Competing Bid Sheets
Finally, since at least September 2018, Diamond Assets has used a bid sheet as part
of its bidding process. (Galster Decl., E. A (dkt. #20-1).) Defendants did not dispute that
Diamond uses a bid sheet, but argued in opposition to plaintiff’s preliminary injunction
motion there is nothing distinctive that would make it entitled to trade dress protection.
The Diamond Bid Sheet displays Diamond’s company name in the upper left corner
of the first, substantive page highlighted in bright green, sans serif font. The sheet also
features two columns of information below the Diamond name in black, sans serif font;
with the left column providing Diamond’s address and contract information, while the
right column provides “Quote Number,” “Quote Type,” “Quote is Valid for,” and customer
contact information fields.

4

(Id.) The Diamond Bid Sheet also includes a table featuring a gray row of column headings
and alternating white and light-green rows of information in the table with column
headings, including, “Description,” “Model Number, “Qty,” “Value,” and “Total Value.”

(Id.)
Device Cycles also uses a bid sheet as part of its business. The Device Bid Sheet
displays Device Cycle’s business name in green, sans serif font in the upper left corner of
the first, substantive page. Defendants do not dispute this, but point out that a number
of businesses use green font to communicate environmentally-friendly business practices.
The Device Bid Sheet also contains two columns, with a left column providing Device
Cycles’ address and contact information, while a right column provides “Quote No.,”
“Quote Date,” “Quote Type,” “Valid Until,” and customer contact information fields. In
addition, the Device Bid Sheet contains a table featuring a gray row, with headings for
“Description,” “Model No.,” “Grade,” “Units,” “Value,” and “Total Value.”

OPINION
To show that it is entitled to a preliminary injunction, plaintiff must demonstrate
(1) a likelihood of success on the merits, (2) no adequate remedy at law, and (3) irreparable
harm if an injunction is not granted. Promatek Indus., Ltd. v. Equitrac Corp., 300 F.3d 808,
811 (7th Cir. 2002). Should plaintiff meet this burden, the court must also consider “any
irreparable harm an injunction would cause the nonmoving party,” and finally, “any

5

consequences to the public from denying or granting the injunction.” Id. The greater the
likelihood of plaintiff’s success on the merits, “the less the balance of harms needs to weigh
in its favor.” Id.
To meet its initial burden demonstrating a likelihood of success on the merits of
these claims, plaintiff must show a “‘better than negligible’ chance of succeeding on the
merits.” Ty, Inc. v. Jones Groups, Inc., 237 F.3d 891, 897 (7th Cir. 2001) (quoting Int’l
Kennel Club of Chi. v. Mighty Star, Inc., 846 F.2d 1079, 1084 (7th Cir. 1988)).
Specifically, in order to prevail on its Lanham Act claim, plaintiff must show that:
(1) its trade dress is protectable; and (2) defendants’ use of the trade dress is likely to cause
confusion among consumers. See Thomas & Betts Corp. v. Panduit Corp., 138 F.3d 277, 291
(7th Cir. 1998). At least for purposes of the motion for a preliminary injunction, plaintiff’s
claim does not get out of the starting block.
“Trade dress” refers to the “total image of a product, including size, shape, color
combinations, graphics, packaging and label.” Badger Meter, Inc. v. Grinnell Corp., 13 F.3d
1145, 1151 (7th Cir. 1994). Thus, as a threshold requirement in proving that its trade
dress is worthy of protection, plaintiff must clearly identify “the discrete elements” that
make up the trade dress. See generally 1 J. Thomas McCarthy, McCarthy on Trademarks &
Unfair Competition § 8.3 at 8-13 (5th ed. 2018) (“All courts agree that the elements of the
alleged trade dress must be clearly listed and described.”) (citing cases); see e.g., Black &
Decker Corp. v. Positec USA Inc., No. 11-CV-5426, 2015 WL 1543262, at *26 (N.D. Ill.
Mar. 31, 2015) (holding that trade dress infringement claim requires plaintiff to articulate
the elements of its alleged trade dress).

6

While claiming trade dress protection in the Diamond Video’s progression and
script, as well as its bid sheet, plaintiff fails to describe clearly the elements of the trade
dress, and likely for good reason, since the elements as best as the court can discern are
either descriptive -- such as the video describing Diamond Assets’ trade-in process, which
appears to be standard across the industry -- or functional -- as in the case of its bid sheet.
Neither of these are entitled to protection. With respect to the Video, plaintiff principally
relies on elements that it contends are arbitrary: “featuring industrial shelving in bokeh 2
during the Diamond Video Progression, featuring ‘upbeat light keyboard background
music over a chorded baseline,’ or referring to Diamond’s device retrieval as ‘white glove
pickup service.’” (Pl.’s Opening Br. (dkt. #21) 15 (quoting Pl.’s PFOFs (dkt. #18) ¶¶ 28,
46).) With respect to the bid sheet, plaintiff relies on “colors, font, and layout,” noting
specifically in its complaint that: the company name is in green front; and there are two
columns of information at the top “with alternating white and green rows.” (Id. at 16;
Compl. (dkt. #1) ¶¶ 67-71).) And even if it had cleared the hurdle of adequately describing
discrete elements in its trade dress, plaintiff must also demonstrate that its trade dress is
entitled to protection, which is nearly impossible to assess given the lack of clarity as to
the essential elements of its supposedly unique trade dress.
Putting that aside, the parties agree on applying the framework adopted by the
United States Supreme Court in Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992),
which classifies trademarks by “categories of generally increasing distinctiveness; following

“In photography, bokeh is the aesthetic quality of the blur produced in out-of-focus parts of an
image.” “Bokeh,” Wikipedia, https://en.wikipedia.org/wiki/Bokeh.

2

7

the classic formulation set out by Judge Friendly”:

(1) generic; (2) descriptive; (3)

suggestive; (4) arbitrary; or (5) fanciful.” Id. at 768 (citing Abercrombie & Fitch Co. v.
Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976)).

Generic dress is entitled to no

protection; descriptive dress is “generally not protectable as trademarks,” but can become
protectable if the dress “acquires secondary meaning”; and suggestive, arbitrary and
fanciful dress are always entitled to protection. Mil-Mar Shoe Co., Inc. v. Shonac Corp., 75
F.3d 1153, 1157 (7th Cir. 1996) (alteration in original). “A generic term is one that is
commonly used to name or designate a kind of goods.” Id. at 1157. “Unlike a trademark,
which identifies the source of a product, a generic term merely specifies the type, or genus,
of thing into which common linguistic usage consigns that product.” Id. at 1157 (quoting
Gilmix, Inc. v. JS & A Group, Inc., 699 F.2d 901, 905 (7th Cir. 1983)). “A descriptive mark,
on the other hand, is one that merely describes the ingredients, qualities, or characteristics
of an article of trade or service.” Id. at 1157.

Finally, “[s]uggestive (‘Tide’ laundry

detergent), arbitrary (‘Apple’ computers), and fanciful (‘Exxon’ gasoline) marks collectively
are distinctive in the sense that secondary meaning is likely to develop, as a result of which
any duplicate use of the name is likely to breed confusion about the product's source.” Bliss
Salon Day Spa v. Bliss World LLC, 268 F.3d 494, 496-97 (7th Cir. 2001).
Here, plaintiff contends that the Diamond Video “require[s] the observer to use
imagination and perception to determine the nature of Diamond’s services, if the nature is
even discernable at all.” (Pl.’s Opening Br. (dkt. #21) 15.) This argument borders on the
silly since even considered as a whole, the Diamond Video merely describes Diamond
Assets’ process for providing its customers with a buyback or trade-in services for tech

8

devices.

Specifically, as detailed in plaintiff’s proposed findings, Diamond Assets’

executives introduce the company and its mission and then describe a “pretty simple”
process, entailing Diamond sending in its “own guys” with “white glove pickup services”
to recover assets. (Pl.’s PFOFs (dkt. #18) ¶ 27.) On site, Diamond further “tags” each
device, packs them in “our specialized boxes,” and “ships them.” (Id.) Afterward, through
an audit, each device is assigned “a grade, based on cosmetic wear, tear, any kind of issues
that is with the device,” which is next “packaged in consumer ready packaging,” placed on
pallets and transported to Diamond Assets’ warehouse,” where they are eventually “sold
wholesale to end users.” (Id.) Finally, after this step is complete, Diamond Assets produces
a “reconciliation report,” capturing each device, which it shares with the customer and
reviews in a follow-up call. (Id.)
At least as pleaded, therefore, nothing about the Diamond Video obviously supports
plaintiff’s contention that it is suggestive, arbitrary or fanciful. Instead, the video would
seem to be plainly descriptive. Nonetheless, plaintiff argues that the video is arbitrary,
pointing to three elements, “industrial shelving in bokeh during the “Diamond Video
Progression,” upbeat light keyboard background music over a chorded baseline, and
referring to Diamond’s retrieval service as “white glove pickup service.” (Pl.’s Opening Br.
(dkt. #21) 15 (internal citations and quotation marks omitted). However, trade dress is
the “total image of a product,” Badger Meter, Inc., 13 F.3d at 1151, and these three aspects
of the video do not seem to capture the total image of the Diamond Video, even if each
aspect, in isolation, could be deemed inherently distinctive. On the record presented by
plaintiff in support of its preliminary injunction motion, therefore, the court is not

9

convinced or, at minimum, plaintiff failed to demonstrate that it is likely to succeed in
proving that the video is entitled to trade dress protection.
As for Diamond’s bid sheet, as plaintiff recognizes, trade dress protection does not
extend to something that is merely functional. See Arlington Specialties, Inc. v. Urban Aid,
Inc., 847 F.3d 415, 418 (7th Cir. 2017) (explaining that “a critical limit on trade dress
rights” is embodied in the “doctrine of functionality”); see also TrafFix Devices, Inc. v.
Marketing Displays, Inc., 532 U.S. 23, 34 (2001) ( “the Lanham Act does not exist to reward
manufacturers for their innovation in creating a particular device; that is the purpose of
patent law and its period of exclusivity”). Thus, plaintiff has the burden to demonstrate
that its trade dress is not “functional.” See 15 U.S.C. § 1125(a)(3) (“In a civil action for
trade dress infringement under this chapter for trade dress not registered on the principal
register, the person who asserts trade dress protection has the burden of proving that the
matter sought to be protected is not functional.”). In light of this restriction, plaintiff
acknowledges that its bid sheet’s trade dress is limited to its “colors, font, and layout,”
none of which are “essential to the use of purpose of” Diamond Assets’ services. (Pl.’s
Opening Br. (dkt. #21) 14 (quoting TrafFix Devices, 532 U.S. at 32).)
Moreover, by disclaiming any functional elements, the bid sheet’s trade dress is
reduced to “product design and color,” which, as plaintiff acknowledges, “can never be
inherently distinctive on its own, but instead can only obtain distinctive status after
secondary meaning has been shown.” (Pl.’s Opening Br. (dkt. #21) 13 (citing Wal-Mart
Stores, Inc. v. Samara Brothers, Inc., 529 U.S. 205, 211-12 (2000); Qualitex Co. v. Jacobson
Prods., Co., 514 U.S. 159, 162-63 (1995)).) Because the bid sheet’s trade dress is not

10

inherently distinctive, therefore, the court finds that plaintiff has failed to present any
evidence demonstrating that its trade dress has taken on any secondary meaning. Finally,
in its opposition, defendant points to other providers in this industry that use green (a
color commonly used to depict environmental products or services), calling into question
if plaintiff could ever meet this burden. (Defs.’ Opp’n (dkt. #27) 20.)
Accordingly, as plaintiff appears to acknowledge in essentially dropping any
argument with respect to the bid sheet in its reply brief in support of a preliminary
judgment, plaintiff has failed to demonstrate that it has a likelihood of succeeding in
demonstrating that either its video or bid sheet is entitled to trade dress protection.

ORDER
IT IS ORDERED that plaintiff Diamond Assets LLC’s motion for preliminary
injunction (dkt. #17) is DENIED.
Entered this 11th day of April, 2022.
BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge

11