InProcessOut, LLC v. World Tech Toys, Inc.

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

REPLY to Response to Motion, filed by InProcessOut, LLC, re [46] MOTION to Dismiss filed by InProcessOut, LLC Supplemental

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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 Plaintiff's Supplemental Reply Brief to its Motion to Dismiss The Court asked the Plaintiff/Counter Defendant to submit a Supplemental Reply Brief in response to Defendant/Counter Plaintiff's Response in Opposition (Document 52) to Plaintiff/Counter Defendant's Motion to Dismiss/Strike (Document 46). The Court requested the Supplemental Reply to address the prejudice to either party if the Court denies the Motion to Dismiss/Strike. Introduction 1. Plaintiff/Counter Defendant is InProcessOut, LLC. 2. Defendant/Counter Plaintiff is World Tech Toys, Inc. 3. Plaintiff/Counter Defendant filed its Amended Complaint with Exhibits as Document 24. 4. Defendant/Counter Plaintiff filed its Answer and Counter Claims as Document 42. 5. Plaintiff/Counter Defendant filed a Motion to Dismiss/Strike as Document 46. 6. Defendant/Counter Plaintiff filed its Response in Opposition as Document 52. 7. Plaintiff/Counter Defendant filed its Reply as Document 54. 1 Applicable Law 8. Plaintiff/Counter Defendant, by virtue of its Federal Trademark Reg. No. 5,491,614, is entitled to a legal presumption of validity, ownership, and exclusive right to use its Trademark in connection with the goods or services in the certificate. See 15 U.S.C. §1057(b). 9. The general standard to survive a motion to dismiss is that the complaint (i.e., in this case, the answer and in particular the counterclaim) must contain sufficient factual matter, if accepted as true, to "state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)). A claim is "plausible" if there are enough facts for the "reasonable inference the defendant is liable for its conduct." Id. "The 'issue is not whether the plaintiff will ultimately prevail, but whether he is entitled to offer evidence to support his claim.'" Jones v. Greninger, 188 F.3d 322, 324 (5th Cir.1999); accord Twombly, 550 U.S. at 556 (noting that the general pleading standards "simply call [] for enough fact[s] to raise a reasonable inference that discovery will reveal evidence" of the claim). Argument A. Defendant/Counter Plaintiff's First and Eighth Affirmative Defense 10. Based on the Court's explanation at initial pretrial hearing that it does not believe affirmative defenses must meet pleading standards required of a complaint, Plaintiff/Counter Defendant does not here present further response regarding its request to strike Defendant/Counter Plaintiff's First and Eighth Affirmative Defense. 2 B. Defendant/Counter Plaintiff's Counterclaim I 11. In its Response in Opposition, Defendant/Counter Plaintiff states that it "clearly alleges" that it used the Mark first and that the allegations are sufficient to plead a claim of non-infringement. However, Defendant/Counter Plaintiff made only conclusory allegations, not assertions of fact, that it "began selling drones under the mark ORION prior to Plaintiff's allegation that it began selling drones under the mark ORION on January 16, 2016." Defendant/Counter Plaintiff Counter Claims, p. 10. 12. The Plaintiff/Counter Defendant is unable to find any assertion of facts in Counter Claim I that support Defendant/Counter Plaintiff's assertion that it has a trademark and that it began selling drones under that trademark before the date of Plaintiff/Counter Defendant's first use of its federally registered trademark. 13. Comparison of Plaintiff/Counter Defendant's Amended Complaint with Exhibits, to Defendant/Counter Plaintiff's Answer and Counter Claims, illustrates the deficiency of the Counterclaim. Plaintiff/Counter Defendant properly pled assertion of facts by reciting its registration and submitting a copy together with the Amended Complaint. Plaintiff/Counter Defendant's allegations of fact are supported by the Exhibits and the fact of the registration with relevant presumptions. In contrast, Defendant/Counter Plaintiff merely makes scant allegations of conclusions without reciting any facts that would tend to support those allegations of conclusions. 14. In fact, the factual allegations stated in Counterclaim I are solely directed to those steps taken by the Plaintiff/Counter Defendant in obtaining its federal trademark registration. 3 15. Defendant/Counter Plaintiff's Counterclaim I does not contain any allegations of facts as required under Iqbal and Twombly. Therefore, 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). 16. Plaintiff/Counter Defendant is prejudiced because it will be forced to conduct extensive discovery of uncertain scope and regarding matters that may/may not relate to the ultimate factual inquiries of Defendant/Counter Plaintiff's alleged conclusions. Moreover, it appears that Plaintiff/Counter Defendant is prejudiced in that it may have to pursue a motion for Summary Judgment to fully identify the grounds on which Plaintiff/Counter Defendant makes its unsupported alleged conclusions. There is no harm or prejudice to Defendant/Counter Plaintiff. Counterclaim I is duplicative of Affirmative Defense No. 6. Moreover, there is nothing precluding Defendant/Counter Plaintiff from amending its Counterclaim to recite appropriate factual allegations, including exhibits, sufficient to meet the required standards. C. Defendant/Counter Plaintiff's Counterclaim II 17. Counterclaim II asks the Court under 35 U.S.C. §1119 to cancel Plaintiff/Counter Defendant's federal trademark registration. This provision is a remedial provision and does not provide an independent basis for cause of action or federal jurisdiction. See Airs Aromatics, LLC v. Opinion Victoria's Secret Stores Brand Mgmt., Inc., 744 F.3d 595, 598-99 (9th Cir. 2014); Nike, Inc. v. Already, LLC, 663 F.3d 89, 99 (2d Cir. 2011). "Section 1119 therefore creates a remedy for trademark infringement rather than an independent basis for federal jurisdiction." Nike, Inc., 663 F.3d at 98. Therefore, 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). 4 18. Plaintiff/Counter Defendant is prejudiced by not dismissing Counterclaim II because otherwise it will be forced to conduct extensive discovery and pursue a Summary Judgement into this Counterclaim. There is no harm or prejudice to the Defendant/Counter Plaintiff as this Counterclaim is redundant in view of its Prayer for Relief paragraph 3. D. Defendant/Counter Plaintiff's Counterclaims III and IV 19. Defendant/Counter Plaintiff's Counterclaim III and IV rely on Counterclaim I for support. As previously discussed, Plaintiff/Counter Defendant is unable to find any assertion of facts that would tend to support Defendant/Counter Plaintiff assertion that it has a trademark and that it began selling drones under that mark before the date of Plaintiff/Counter Defendant first use of its federally registered trademark. 20. Comparison of Plaintiff/Counter Defendant's Amended Complaint with Exhibits, to Defendant/Counter Plaintiff's Answer and Counter Claims, illustrates the deficiency of the Counterclaim. Plaintiff/Counter Defendant properly pled assertion of facts by reciting its registration and submitting a copy together with the Amended Complaint. Plaintiff/Counter Defendant's allegations of fact are supported by the Exhibits and fact of the registration with relevant presumptions. In contrast, Defendant/Counter Plaintiff merely makes scant allegations of conclusions without reciting any facts that would tend to support those allegations of conclusions. 21. Defendant/Counter Plaintiff's Counterclaims III and IV do not contain any allegations of facts as required under Iqbal and Twombly. Therefore, Counterclaims III and IV fail to state a claim upon which relief may be granted and should be dismissed under Fed. R. Civ. P. 12(b)(6). 5 22. Plaintiff/Counter Defendant is prejudiced by not dismissing Counterclaim III and IV because otherwise it will be forced to conduct extensive discovery and pursue a Summary Judgement into these unsupported conclusions devoid of factual assertions. There is no harm or prejudice to Defendant/Counter Plaintiff as Counterclaim I is duplicative of its Affirmative Defense No. 6, or Defendant/Counter Plaintiff can amend its Counterclaim to include allegations of facts, including exhibits, to meet applicable pleading standards. Conclusion 23. The Court should dismiss Counterclaims I, II, III, and IV because they fail to state a claim upon which relief can be granted and should be dismissed under Fed. R. Civ. P. 12(b)(6). In addition, the Court should dismiss Counterclaims I, II, III, and IV because they are redundant material and should be dismissed under Fed. R. Civ. P. 12(f). 24. Plaintiff/Counter Defendant is prejudiced if the Counterclaims I, II, III, and IV are not dismissed, because Plaintiff/Counter Defendant will otherwise be forced to conduct extensive discovery without any knowledge of factual allegations of Defendant/Counter Plaintiff. Moreover, Plaintiff/Counter Defendant may be forced to seek a Summary Judgement in order to understand on what factual basis the Counterclaims may be made. 25. There is no harm or prejudice to Defendant/Counter Plaintiff as Counterclaims I, II, III, and IV are duplicative of several of its Affirmative Defenses and/or Remedies or Defendant/Counter Plaintiff can amend its Counterclaim to include facts by way of Exhibits. 6 Date: September 24, 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 7 Certificate of Service I certify that I filed this filing on September 24, 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 8