InProcessOut, LLC v. World Tech Toys, Inc.

Western District of Texas, txwd-5:2018-cv-00869

MOTION to Dismiss by InProcessOut, LLC.

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1 United States District Court Western District of Texas San Antonio Division InProcessOut, LLC Plaintiff/Counter Defendant v. Civil Action No. 5:18-cv-00869-FB World Tech Toys, Inc. Jury Trial Defendant/Counter Plaintiff Motion to Dismiss for Failure to Properly Plead under Rules 8(c)(1) and 9(b); Motion to Strike under Rule 12(f); Motion to Dismiss under Rule 12(b)(6) Plaintiff/Counter Defendant InProcessOut, LLC asks the Court to dismiss certain of Defendant's counterclaims for failure to properly plead under Fed. R. Civ. P. 8(c)(1), 9(b) and 12(b)(6). Plaintiff/Counter Defendant also asks the Court to strike certain of Defendant's affirmative defenses under Fed. R. Civ. P. 12(f). Introduction 1. Plaintiff/Counter Defendant is InProcessOut, LLC. 2. Defendant/Counter Plaintiff is World Tech Toys, Inc. 3. Plaintiff/Counter Defendant sued Defendant/Counter Plaintiff for trademark infringement and unfair competition. 4. Defendant/Counter Plaintiff answered alleging certain affirmative defenses and counterclaims. 5. Defendant/Counter Plaintiff's 1st Affirmative Defense is not properly pled under Fed. R. Civ. P. 8(c)(1). 1 1 6. Defendant/Counter Plaintiff's 8th Affirmative Defense alleges fraud but does not plead with particularity as required by Fed. R. Civ. P. 9(b). 7. Defendant/Counter Plaintiff's Counterclaim I alleges fraud but does not plead it with particularity as required by Rule 9(b). Additionally, Defendant/Counter Plaintiff's Counterclaim I fails to state a claim upon which relief can be granted and should be dismissed under Fed. R. Civ. P. 12(b)(6). Further, Defendant/Counter Plaintiff's Counterclaim I is redundant and should be stricken under Fed. R. Civ. P. 12(f) in view of certain of Defendant/Counter Plaintiff's pled Affirmative Defenses. 8. Defendant/Counter Plaintiff's Counterclaims II, III, and IV fail to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6). Further, Defendant/Counter Plaintiff's Counterclaim II, III, and IV are redundant and should be stricken under Fed. R. Civ. P. 12(f) in view of certain of Defendant/Counter Plaintiff's pled Affirmative Defenses. Applicable Law 9. Fed. R. Civ. P. 8(a) provides that all pleadings must contain (1) a short and plain statement of the grounds for the Court's jurisdiction, (2) a short and plain statement of the claim showing that the party is entitled to relief, and (3) a demand for the relief sought. 10. Fed. R. Civ. P. 8(c)(1) provides that in responding to a pleading, a party must affirmatively state any avoidance or affirmative defense. 11. Fed. R. Civ. P. 8(d)(1) provides that each allegation in the pleading must be simple, concise, and direct. 12. Fed. R. Civ. P. 9(b) provides that in all pleadings alleging fraud/mistake, the circumstances constituting fraud/mistake must be pleaded with particularity. United States ex rel. Gagne v. City of Worcester, 565 F.3d 40, 45 (1st Cir. 2009); In re Stac 2 1 Elecs. Secs. Litig., 89 F.3d 1399, 1404 (9th Cir. 1996); Vicom, Inc. v. Harbridge Merch. Servs. Inc, 20 F.3d 771, 777 (7th Cir. 1994). 13. Fed. R. Civ. P. 12(b)(6) provides that a party may assert by motion a defense for failure to state a claim upon which relief can be granted. When considering a defendant's motion to dismiss, a court must construe the factual allegations in the complaint in the light most favorable to the plaintiff. Barker v. Riverside Cty. Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009); see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). If the complaint provides fair notice of the claim and the factual allegations are sufficient to show that the right to relief is plausible, a court should deny the defendant's motion. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Twombly, 550 U.S. at 555-56; Woods v. City of Greensboro, 855 F.3d 639, 652-53 and n.9 (4th Cir. 2017); Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009). However, a court may dismiss a counterclaim if it fails to state a claim. See Kaiser Aluminum & Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1061 (5th Cir. 1982). 14. The elements of a claim for federal trademark infringement are: 1) Plaintiff possesses a valid trademark; and (2) Defendant's use of Plaintiff's trademark creates a likelihood of confusion as to source, affiliation, or sponsorship. Nola Spice Designs, L. L.C. v. Haydel Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015); Nat'l Bus. Forms & Printing, Inc. v. Ford Motor Co., 671 F.3d 526, 532 (5th Cir. 2012); 15 U.S.C. § 1114(1). 15. The elements of a claim for federal unfair competition and false designation of origin are found in 15 U.S.C. § 1125(a)(1) (Section 43(a) of the Lanham Act) which provides: Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false 3 1 designation of origin, false or misleading description of fact, or false or misleading representation of fact, which — (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act. 16. Section 43(a) has been characterized as a remedial statute that should be broadly construed. Schlotzsky's, Ltd. v. Sterling Purchasing, 520 F.3d 393, 399 (5th Cir. 2008) (citing Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1383 (5th Cir.1996)). And, the purpose of Section 43(a) is to provide remedies for unfair and misleading use of trademarks. Id. (citing Procter & Gamble Co. v. Amway Corp., 242 F.3d 539, 563 (5th Cir.2001)). Further, the language of Section 43(a) is broader than much of the Lanham Act in that it prohibits unfair competition and false designation of origin, including trademark infringement that deceives consumers and impairs a producer's goodwill. Id. (citing Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 33 (2003)). 17. Fed. R. Civ. P. 12(f) provides that a court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. The court has discretion in the determination. Such motions, however, are generally disfavored; but a motion to strike a defense should be granted where the challenged defense is insufficient as a matter of law. Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1057 (5th Cir. 1982); Woldetadik v. 7-Eleven, Inc., 881 F.Supp.2d 738, 744 (N.D. Tex. 2012); FDIC v. Niblo, 821 F.Supp. 441, 449 (N.D.Tex.1993) (citing Augustus v. Bd. of Pub. Instr. of Escambia County, Florida, 306 F.2d 862, 868 (5th Cir.1962). A court may in any event strike counterclaims or affirmative defenses if they are redundant in view of the complaint and/or affirmative defenses. See e.g., Smith v. 4 1 Barnesandnoble.com, 1:12-cv-04374, Document 33 (S.D. NY 03/18/2014) (declaratory judgement counterclaims redundant in view of complaint and affirmative defenses); Pettrey v. Enterprise title Agency, Inc. et al., 1:05-cv-01504, Document 96 (N.D. Ohio 11/17/2006) (declaratory judgment counterclaims identical to complaint); Both Smith and Pettrey cite Aldens, Inc. v. Packel, 524 F.2d 38, 51-52 (3rd Cir. 1975) (counterclaim essentially identical to complaint); see also Wright & Miller, 5C Fed. Prac. & Proc. Civ. § 1382 (3d ed.) and footnotes 28-38. Argument A. Defendant/Counter Plaintiff's First Affirmative Defense Rule 8(c)1 and 12(b)(6) – not properly pled 18. Defendant/Counter Plaintiff's First Affirmative Defense is not properly pled under Fed. R. Civ. P. 8(c)(1). 19. A motion under Rule 12(b)(6), not an answer, is the proper pleading in which to raise an issue of "fails to state a cause of action for which relief can be granted." B. Defendant/Counter Plaintiff's Eighth Affirmative Defense Rule 9(b) – failure to plead with particularity 20. Defendant/Counter Plaintiff's Eighth Affirmative Defense alleges fraud but does not plead it with any particularity as required by Rule 9(b). 21. Defendant/Counter Plaintiff sets out factual issues in paragraph 5-9 but these are all fact issues directed to Plaintiff/Counter Defendant's filing of a trademark application for US TM Reg. No. 5491614. There is not anything pled in the paragraphs of Defendant/Counter Plaintiff's answer that is particular or that would constitute an affirmative defense. Defendant/Counter Plaintiff's alleged affirmative defense does not 5 1 plead any additional facts -- outside of the fact that Plaintiff/Counter Defendant filed its trademark application -- that could support a showing of the alleged fraud. C. Defendant/Counter Plaintiff's Counterclaim I Rule 9(b) – failure to plead with particularity 22. Defendant/Counter Plaintiff's Counterclaim I essentially alleges fraud, but it failed to plead any facts of alleged fraud with particularity as required by Rule 9(b). 23. Defendant/Counter Plaintiff sets out factual issues in paragraphs 5-9 of the answer but these are all facts directed to Plaintiff/Counter Defendant's filing of a trademark application for US TM Reg. No. 5491614. There is not anything pled in the paragraphs of Defendant/Counter Plaintiff's answer that is particular or that would constitute an affirmative defense. Defendant/Counter Plaintiff's alleged affirmative defense does not plead any additional facts -- outside of the fact that Plaintiff/Counter Defendant filed its trademark application -- that could support a showing of the alleged fraud. Rule 12(f) – strike redundant material 24. Defendant/Counter Plaintiff's Counterclaim I, paragraphs 10-12, are redundant in view of its Affirmative Defenses 6, 7, and 9. 25. Defendant/Counter Plaintiff alleges that it was first to use the trademark and does not infringe in paragraphs 10-12, and also asserts the very same as an alleged affirmative defense in its Affirmative Defenses 6, 7, and 9. The matter is redundant and should be stricken. Rule 12(b)(6) – failure to state a claim 26. Defendant/Counter Plaintiff's Counterclaim I also fails to state a claim upon which relief can be granted and should be dismissed under Fed. R. Civ. P. 12(b)(6). 6 1 Defendant/Counter Plaintiff asks the Court for a Declaratory Judgement that it has not infringed Plaintiff/Counter Defendant's trademark rights, committed unfair competition or false designation of origin, violated any of Plaintiff/Counter Defendant's common law competition or trademark rights, committed common law misappropriation, or committed unjust enrichment under the common law. This laundry list of proposed grounds is not supported by any allegations of facts. Plaintiff/Counter Defendant has a federal trademark registration and alleged in the complaint that it first sold product bearing the trademark ORION prior to Plaintiff/Counter Defendant. Defendant/Counter Plaintiff does not plead any facts that would support its broad and conclusive statement of priority in its Counterclaim ¶ 10. Defendant/Counter Plaintiff's Counterclaims makes no factual showing that could support its Counterclaim. D. Defendant/Counter Plaintiff's Counterclaims II 27. Defendant/Counter Plaintiff's Counterclaim II essentially asks that Plaintiff/Counter Defendant's federal trademark registration be canceled by the Court. This Counterclaim is a requested remedy, not a cause of action per se. Rule 12(f) – strike redundant material 28. Defendant/Counter Plaintiff's Counterclaim II is redundant in view of its Prayer for Relief paragraph 3. The Counterclaim should be stricken. Rule 12(b)(6) – failure to state a claim 29. Moreover, because Defendant/Counter Plaintiff pleads only a requested remedy, its Counterclaim II fails to state a claim upon which relief can be granted and should be dismissed. 7 1 E. Defendant/Counter Plaintiff's Counterclaims III 30. Defendant/Counter Plaintiff's Counterclaim III essentially alleges Unfair Competition. Rule 12(b)(6) – failure to state a claim 31. The Counterclaim fails to plead any alleged facts and, instead, is wholly conclusory. Defendant/Counter Plaintiff pleads that it has priority of use in its Counterclaims (Answer, ¶¶ 10, 14). Defendant/Counter Plaintiff, however, fails to allege any facts that could support that conclusion. Defendant/Counter Plaintiff's Counterclaim III therefore fails to state a claim upon which relief can be granted and should be dismissed under Fed. R. Civ. P. 12(b)(6). F. Defendant/Counter Plaintiff's Counterclaims IV 32. Defendant/Counter Plaintiff's Counterclaim III alleges common law trademark infringement. Rule 12(b)(6) – failure to state a claim 33. The Counterclaim fails to plead any alleged facts and, instead, is wholly conclusory. Defendant/Counter Plaintiff pleads that it has priority of use in its Counterclaims (Answer, ¶¶ 10, 14). Defendant/Counter Plaintiff, however, fails to allege any facts that could support that conclusion. Defendant/Counter Plaintiff's Counterclaim IV thus fails to state a claim upon which relief can be granted and should be dismissed under Fed. R. Civ. P. 12(b)(6). 8 1 Conclusion 34. Because Defendant/Counter Plaintiff's 1st Affirmative Defense is not properly plead under Fed. R. Civ. P. 8(c)(1), the Court should strike the 1st Affirmative Defense. 35. Because Defendant/Counter Plaintiff's 8th Affirmative Defense fails to plead fraud with particularity as required by Rule 9(b), the Court should strike the 8th Affirmative Defense. 36. Because Defendant/Counter Plaintiff's Counterclaim I fails to plead fraud with particularity as required by Rule 9(b) and it also is redundant material under Fed. R. Civ. P. 12(f), the Court should dismiss Counterclaim I. Alternatively or additionally, Counterclaim I fails to state a claim upon which relief can be granted and should be dismissed under Fed. R. Civ. P. 12(b)(6). 37. Because Defendant/Counter Plaintiff's Counterclaim II is redundant material under Fed. R. Civ. P. 12(f), the Court should dismiss Counterclaim II. Alternatively or additionally, Counterclaim II fails to state a claim upon which relief can be granted and should be dismissed under Fed. R. Civ. P. 12(b)(6). 38. Because Defendant/Counter Plaintiff's Counterclaim III fails to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6), the Court should dismiss Counterclaim III. 39. Because Defendant/Counter Plaintiff's Counterclaim IV fails to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6), the Court should dismiss Counterclaim IV. 9 1 Date: August 8, 2019 Respectfully submitted, /s/ Matthew J. Booth Matthew J. Booth Dale Langley The Law Firm of H. Dale Langley Jr., P.C. Texas Bar No. 11918100 1803 West Avenue Austin TX 78701 Tel: +1 (512) 477-3830 Fax: +1 (512) 597-4775 dlangley@iptechlaw.com Matthew J. Booth Matthew J. Booth PC Texas Bar No. 02648300 5501A Balcones Drive, Suite 301 Austin Texas 78731 Tel: +1 (512) 474-8488 Fax: +1 (512) 596-2875 matthew.booth@boothlaw.com Legal Counsel for Plaintiff InProcessOut, LLC 10 1 Certificate of Service I certify that I filed this filing on August 8, 2019 electronically using the CM/ECF system that will send notification of this filing to all counsel of record. /s/ Matthew J. Booth Matthew J. Booth 11