Covet & Mane, LLC v. Invisible Bead Extensions, LLC
| Docket Number | 21-CV-7740 (JPC) (RWL) |
| Decision Date | 23 March 2023 |
| Parties | COVET & MANE, LLC, Plaintiff, v. INVISIBLE BEAD EXTENSIONS, LLC, Defendant. |
| Court | U.S. District Court — Southern District of New York |
ORDER AND DECISION, AND REPORT AND RECOMMENDATION TO HON. JOHN P. CRONAN: MOTION TO AMEND
Plaintiff Covet & Mane, LLC (“Plaintiff” or “C&M”) brings this action against Defendant Invisible Bead Extensions, LLC (“Defendant” or “IBE”) for (i) declaratory judgment that C&M has not infringed any of IBE's intellectual property (ii) cancellation of IBE's various intellectual property registrations, and (iii) damages for IBE's alleged violation of the Sherman and Clayton Acts, fraudulent inducement, unjust enrichment, breach of contract misappropriation of trade secrets, breach of fiduciary duty and unfair business practices in violation of state law. C&M now seeks leave to amend to add nine additional claims: three concerning a trademark obtained on February 9 2021; five based on a patent issued to IBE on August 23, 2022; and one claim of product disparagement. C&M also seeks to add three additional defendants: McKenzie Turley (“Turley”), Cassadi Currier (“Currier”), and Kitsune Hair Co., LLC (“Kitsune”). For the following reasons, Plaintiff's motion to amend is GRANTED IN PART to allow leave to amend to include the three additional defendants and all proposed additional claims except the product disparagement claim. Further, the Court recommends DENYING leave to amend to include the product disparagement claim.[1]
Plaintiff C&M designs, manufactures, and sells “proprietary cut-point hair wefts and related products.” (FAC ¶ 7.[2]) C&M's hair wefts are installed using beads “to create seamless blending of the hair weft and the natural hair.” (FAC ¶ 16.) C&M's hair extensions are sourced from human hair, offered at a variety of lengths and colors, and exclusively sold to high-end stylists and salons who undergo an approval process and an education program on how to properly apply C&M's hair wefts. (FAC ¶¶ 14-15, 17-18.)
Defendant IBE competes with C&M in the luxury hair weft industry. In 2019, prior to the launch of IBE's own line of hair extensions, C&M and IBE discussed entering into a partnership in which IBE would provide educational training to stylists and C&M would sell hair wefts and customized kits to those stylists. (FAC ¶ 35.) Based on representations made by Turley, which C&M alleges to be false, C&M provided confidential information to IBE designed a special line of proprietary hair wefts for IBE to be sold to IBE stylists, and created customized training kits for IBE. (FAC ¶¶ 39-45.) In July 2020, however, Turley informed C&M that rather than partnering with C&M, IBE had decided to sell its own hair weft products and education kits. (FAC ¶ 54.) As a result, IBE now develops, markets, and sells hand-tied hair wefts, education programs, and training services to stylists. (FAC ¶¶ 56-60.)
On August 26, 2021, C&M received a cease-and-desist letter from IBE stating that IBE owned trademarks and other intellectual property, including a patent application and copyrights, that C&M was using without authorization, and threatening legal action if C&M did not cease do to so. (FAC ¶¶ 93-96; Dkt. 129-11.) C&M then commenced the instant action on September 15, 2021, seeking declaratory judgment that C&M did not infringe IBE's intellectual property, including IBE's federal trademark registrations for “Invisible Bead Extensions” with Registration No. 6,116,743 (the “'743 Trademark”) and “IBE” with Registration No. 6,266,446 (the “'446 Trademark”). (Dkt. 3 (Complaint) ¶ 1.) C&M also asserted claims for (1) cancellation of the '743 Trademark due to fraudulent misuse, fraud on the United States Patent and Trademark Office (“USPTO”), and on the grounds that it is descriptive and functional; and (2) compensatory and treble damages for IBE's alleged Sherman Act and Clayton Act violations premised on invalid intellectual property rights, including both the '743 and '446 Trademarks. (Compl. ¶ 1.)
IBE answered and asserted counterclaims on November 16, 2021. (Dkt. 16.) IBE's counterclaims allege (1) breach of contract based on C&M's failure to abide by the terms of the partnership agreement with IBE; (2) federal trademark infringement and false designation of origin with respect to the '743 and '446 Trademarks; and (3) trademark infringement, unfair competition, and dilution under New York common and statutory law. (Dkt. 16 at 15-16 ¶ 1.)
On December 21, 2021, the Court issued a Civil Case Management Plan and Scheduling Order setting January 20, 2022 as the deadline by which the parties could amend their pleadings or join additional parties. (Dkt. 24 at 1.) The Court also set April 21, 2022 as the deadline for completing fact discovery and July 25, 2022 as the deadline for completing expert discovery. (Dkt. 24 at 1-2.)
On January 10, 2022, C&M filed the FAC. Among other additions, the FAC asserted that IBE's pending patent application was invalid for multiple reasons, including that the claimed method was anticipated by prior art, was obvious, and was being secured by IBE's attempted fraud on the USPTO. (FAC ¶¶ 66-74.) C&M also included several additional claims for damages, including claims for fraudulent inducement, unfair business practices under New York law, unjust enrichment, breach of contract, misappropriation of trade secrets, and breach of fiduciary duty. (FAC ¶¶ 124-84.)
On March 3, 2022, the parties jointly requested, and the Court granted, an extension of fact discovery to June 24, 2022 and expert discovery to September 23, 2022. (Dkts. 50-51.) On June 16, 2022, the parties again jointly requested, and the Court granted, an extension of fact discovery to September 2, 2022 and expert discovery to December 2, 2022. (Dkts. 79-80.) At neither point did C&M seek to alter the date by which the parties were to amend their pleadings to add new claims or parties.
In July 2022, IBE deposed C&M's Chief Executive Officer, Dafina Smith (“Smith”). (Dkts. 98,99.) In mid-August 2022, C&M deposed Turley, founder and co-owner of both IBE and Kitsune, an IBE affiliate offering luxury hand-tied hair products (Dkts. 132-22, 132-23); Tyler Turley, Turley's husband as well as IBE's majority owner and corporate representative (Dkt. 132-21); and Currier, an IBE stylist and co-owner of Kitsune (Dkt. 132-26). On August 11, 2022, IBE produced 8,358 pages of documents to C&M. (Pl. Mem. at 17.[3])
On August 23, 2022, IBE's pending patent application issued as Patent No. U.S. 11,419,376 B2 (the “'376 Patent” or “IBE Patent”). (Dkt. 108-1.) On August 29, 2022, C&M informed the Court of the '376 Patent having issued, requested an extension of fact discovery of at least 60 days, and previewed its forthcoming motion for leave to file a second amended complaint to include claims related to the '376 Patent as well as to add additional defendants based on information newly disclosed in the recently produced documents. (Dkt. 108.) IBE opposed both the length of the fact discovery extension requested and C&M's request for leave to amend. (Dkts. 111, 116.)
The Court held a discovery conference on September 12, 2022 to discuss discovery disputes and C&M's desire to amend its complaint. (See Dkts. 113, 117.) Following the conference, the Court ordered full briefing on C&M's application to file a Second Amended Complaint (“SAC”). The Court also extended fact discovery to October 31, 2022. (Dkt. 118.)
C&M moved for leave to file its SAC on September 29, 2022. (Dkts. 128-29, 13132, 138-39.[4]) The proposed SAC includes nine additional claims that can be grouped into three categories: (1) cancellation of the '446 Trademark for “IBE” pursuant to 15 U.S.C. § 1119, cancellation of the '446 Trademark for false and fraudulent procurement thereof, and fraudulent misuse of the '446 Trademark (together, the “'446 Trademark Claims”); (2) declaration that the '376 Patent is invalid due to obviousness, declaration that the '376 Patent is invalid as anticipated by prior art, declaration that the IBE Patent is invalid due to an on-sale bar, cancellation of the '376 Patent due to inequitable conduct, and fraudulent misuse of the '376 Patent (together, the “Patent Claims”); and (3) product and brand disparagement. (See SAC ¶¶ 224-310, 373-79.) Based on information purportedly first learned during discovery in August 2022, C&M also seeks to add three defendants: Kitsune, Turley, and Currier (together, the “New Defendants”). C&M asserts that it acted diligently in seeking to amend, considering the recent issuance of the '376 Patent, newly discovered information, and IBE's alleged delay in producing requested documents.
On October 11, 2022, IBE presented to C&M a release and covenant not to sue related to the '376 Patent (the “Covenant”) and asked that, in view of the Covenant, C&M withdraw its motion to add allegations regarding the '376 Patent. (Dkt. 145-1.) The language of the Covenant as initially proposed read:
IBE, on behalf of itself and any successors-in-interest to the '376 patent, hereby releases and covenants not to sue Covet & Mane, LLC (“C&M”) for infringement of the '376 patent for the use, sale, and/or offer for sale of any products or services, including methods employed by those products or services, that currently exist and have been used[,] sold, and/or offered for sale by C&M as of October 11, 2022.
(Dkt. 145-1.) C&M rejected the Covenant and the request to withdraw its motion to amend. (Dkt. 145-2 at 2.) IBE then clarified that it was offering a covenant not to sue, not only for past conduct, but also “on a going-forward basis for any products or services that are being or have been offered by C&M as of the...
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