CDC Newburgh Inc. v. STM Bags, LLC
| Docket Number | 22-cv-1597 (NSR) |
| Decision Date | 18 September 2023 |
| Parties | CDC NEWBURGH INC., Plaintiff, v. STM BAGS, LLC and LIENAU SALES AND MARKETING, LLC d/b/a LIENAU Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiff CDC Newburgh Inc. (CDC) commenced this action on February 25 2022 against Defendants STM Bags, LLC (“STM” or “Defendant”) and Lienau Sales and Marketing, LLC (“Lienau” or “Defendant) (collectively “Defendants”), alleging violations of New York state and federal law arising from Defendant's involvement in the removal of ten of its product listings from Amazon.com. (ECF No. 1.) In its Amended Complaint (“AC”), Plaintiff advances the following claims against both Defendants: (1) defamation; (2) tortious interference with prospective business relations; (3) a declaratory judgment of non-infringement; and (4) common law unfair competition. (ECF No. 29, “AC”.) Defendant STM, in response, asserts the following counterclaims against Plaintiff: (1) trademark infringement under both federal and New York state common law; (2) false advertising; (3) unfair competition; and (4) trademark dilution. (ECF No. 35 “Answer”.)
Before the Court are Defendant Lienau's motion to dismiss Plaintiff's Amended Complaint and add a counterclaim (ECF No. 43), as well as Plaintiff's motion to dismiss Defendant STM's counterclaims (ECF No. 36). For the reasons that follow, the Court GRANTS Defendant Lienau's motion to dismiss Plaintiff's Amended Complaint in its entirety, but GRANTS in part, and DENIES in part, Plaintiff's motion to dismiss Defendant STM's counterclaims.
The following facts are drawn from Plaintiff's Amended Complaint and are accepted as true and construed in the light most favorable to Plaintiff for purposes of Plaintiff's motion to dismiss. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir.2002).
Plaintiff is a “non-authorized reseller” of consumer products that it purchases from resellers and distributors, among other sources, in order to resell these products at a discount. (AC ¶¶ 8-10.) Although Plaintiff does not usually purchase its inventory directly from the relevant manufacturers, it claims that its products are authentic. (Id.) Plaintiff sells its products through online marketplaces like Amazon.com (“Amazon”). (Id. ¶ 11.)
Plaintiff alleges that Amazon's policy regarding reports of intellectual property infringement (the “Policy”) are known to Defendants, given Defendants' familiarity with ecommerce. (Id. ¶ 12.) The Policy purportedly encompasses the following procedures: (1) when a trademark owner submits a report that a seller is listing a counterfeit product on Amazon, Amazon automatically removes the listing without warning to the seller; and (2) Amazon does not remove product listings in response to reports that a non-authorized seller is selling authentic products (Id. ¶¶ 12-14.) Additionally, Plaintiff alleges that, following Amazon's removal of a product in response to a counterfeiting report, Amazon's algorithm considers this history of removal when determining how frequently the accused seller's other products appear in consumer's searchers.
(Id. ¶ 16.) Plaintiff claims that this practice reduces the accused seller's sales of all products that it lists on Amazon. (Id.)
Defendant STM sells cases, bags, sleeves, and other accessories for electronic devices under the “STM” and “DUX” trademarks. (AC ¶ 19.) Defendant Lienau offers sales, marketing, analytics, and logistics services to companies operating in the consumer products sector, including assisting clients with removing fraudulent products from Amazon's website. (Id. ¶ 20.)
Plaintiff alleges that Defendant Lienau has served as a commission-based sales representative of Defendant STM at all relevant times. (Id.) Moreover, Plaintiff alleges that STM has authorized Lienau to independently enforce STM's trademark rights by reporting violations of these rights. (Id. ¶ 21.) Plaintiff thereby claims that Lienau acted on its own behalf and as STM's agent when reporting Plaintiff's products to Amazon, on the basis that Lienau has a financial interest in eliminating lawful non-authorized sales of STM's products. (Id. ¶¶ 22-23, 31.)
On February 15, 2022, Plaintiff received a notice from Amazon that Defendant Lienau had reported Plaintiff to Amazon for selling counterfeit versions of Defendant STM's DUX shell sleek case for the Apple iPad Pro and that, as a result, Plaintiff's listing for this item was removed. (Id. ¶ 24.) In response, Plaintiff contacted Lienau to explain that this item was authentic, object to Lienau's filing of this report without conducting a test purchase, and demand that Lienau retract this report. (Id. ¶ 25.) Between February 16 and 17, 2022, Lienau filed additional reports with Amazon (collectively, with its initial report, the “Reports”) that instigated the removal of nine more of Plaintiff's listings on Amazon for STM cases. (Id. ¶ 26.)
Plaintiff alleges that it knew that the items it sold through these ten listings (the “Products”) were authentic because it obtained them from a reputable, publicly traded company that purchases these items from STM. (Id. ¶ 27.) Additionally, Plaintiff claims that Lienau filed the Reports for anticompetitive reasons after it, STM, and/or both Defendants suspected or confirmed the products were genuine. (Id. ¶¶ 28, 30.)
The following facts are drawn from the allegations in Counterclaim Plaintiff's counterclaims and are accepted as true and construed in the light most favorable to Counterclaim Plaintiff for purposes of Counterclaim Defendant's motion to dismiss. Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972); Oteze Fowlkes v. Adamec, 432 F.3d 90, 95 (2d Cir. 2005).
STM develops, manufactures, markets, and sells mobile device, smartphone, and tablet cases and accessories under the STM, STM Goods, and DUX brands.[1] (Answer ¶ 4) It sells its products through a network of authorized dealers (the “Authorized Dealers”). (Id.) STM claims that it has established several trademarks (the “Trademarks”), through either the use of the trademarks in commerce or by registering them with the United States Patent and Trademark Office (the “USPTO”).[2] (Id. ¶ 6.) Additionally, STM alleges that it actively uses, advertises, and markets the STM Trademarks throughout the United States and that the “general consuming public” thereby associates the STM Trademarks with high-quality mobile device cases and accessories. (Id. ¶¶ 9-13.)
STM alleges that online marketplaces threaten a manufacturer's ability to maintain its brand integrity because customers cannot easily distinguish between the authorized and unauthorized sellers of a manufacturer's products. (Answer ¶¶ 14-23.) In response to this issue, STM developed quality controls to ensure that purchasers of STM products receive the “special characteristics” they purportedly expect from products sold under the STM Goods and DUX names, which include the STM Warranty. (Id. ¶¶ 24-27.) STM further claims that its ability to exercise these quality controls is essential to the quality of its products as well as the value of its Trademarks. (Id. ¶¶ 27-28.)
One such quality control is STM's practice of conducting all sales directly or through its authorized dealers (the “Authorized Dealers”). (Id. ¶ 29.) STM's Authorized Dealers are required to abide by a specific policy (the “Policy”). (Id. ¶ 30.) The Policy prohibits Authorized Dealers from selling products on third-party websites, including marketplaces like Amazon, without express authorization from STM, requires Authorized Dealers to adhere to STM's quality control requirements as they relate to returns and warranties, and imposes requirements pertaining to how STM's Trademarks, trade names, and product images and description are used and displayed. (Id. ¶¶ 31-34.) STM products purchased from STM and Authorized Dealers also include the STM Warranty (the “Warranty”), which provides that a customer can receive a repair or replacement product if that product possesses a defect in manufacturing, materials, or workmanship during the applicable warranty period. (Id. ¶ 37.) The STM Warranty is purportedly a “material component” of “genuine” STM products because consumers factor the existence of this Warranty into their decision to purchase an STM product. (Id. ¶¶ 39-40.)
STM alleges that these quality control requirements are “material,” because consumers consider it relevant to their purchasing decision whether the STM product they may buy is sold by an authorized seller subject to such requirements, rather than a non-authorized seller who does not need to abide by them. (Id. ¶¶ 35-36.)
Counterclaim Defendant is not an Authorized Dealer. (Answer ¶ 41.) STM reasons that, in consequence, it does not follow STM's quality control measures, particularly as it has not provided STM with its business information or given STM an opportunity to vet it. (Id. ¶ 42.) Specifically, STM notes that Counterclaim Defendant does not comply with STM's quality control requirements because it sells the Products on its Amazon storefront...
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