Grand River Enters. Six Nations Ltd. v. VMR Prods. LLC
| Decision Date | 29 May 2014 |
| Docket Number | 13-cv-104-wmc |
| Parties | GRAND RIVER ENTERPRISES SIX NATIONS LTD., Plaintiff, v. VMR PRODUCTS LLC, d/b/a V2 CIGS, Defendant. |
| Court | U.S. District Court — Western District of Wisconsin |
In this action for trademark infringement, plaintiff Grand River Enterprises Six Nations, Ltd. ("Grand River") alleges that defendant VMR Products LLC's ("VMR") use of the VAPOR COUTURE mark in connection with electronic cigarettes infringes Grand River's federal trademark rights in its registered COUTURE mark.1 Both parties have moved for summary judgment. (Dkt. ##49, 56.) Also currently pending is VMR's motion to file an amended answer, affirmative defenses and counterclaim. (Dkt. #54.) For the reasons that follow, the court will grant leave to amend and deny both parties' motions for summary judgment.
VMR's proffered amended pleading is essentially the same as its original in most respects, with two related exceptions. First, VMR seeks to add as an affirmative defense its assertion that Grand River lacks enforceable trademark rights in the COUTURE mark due to alleged lack of use in United States commerce. Second, VMR seeks to add a counterclaimfor declaratory judgment that the COUTURE mark is invalid and unenforceable. (See Am. Answer (dkt. #55) Eleventh & Twelfth Affirmative Defenses, Counterclaim.)
While leave to amend pleadings should be freely given when justice so requires, Fed. R. Civ. P. 15(a)(2), circumstances may counsel against it. Brunt v. Serv. Emps. Int'l Union, 284 F.3d 715, 720 (7th Cir. 2002). For example, undue delay, bad faith or dilatory motive, prejudice to the other party, repeated failures to cure defects and futility justify a court denying leave to amend a pleading. Foman v. Davis, 371 U.S. 178, 182 (1962).2
VMR filed for leave to amend less than a month after filing its first answer, based on information it apparently discovered in the interim with respect to Grand River's filings in other courts. Moreover, VMR represents without contradiction that upon discovery of other litigation involving Grand River, it launched a diligent investigation and advised Grand River of its intent to move for leave to file the amended answer. There is, therefore, no evidence of bad faith, dilatory motive or undue delay on VMR's part. While Grand River also contends that it is prejudiced by the amendment, the short passage of time makes this unlikely. Indeed, Grand River has been able to brief the issues VMR raised in full in its response to the motion to amend (dkt. #67), and in its response to VMR's own motion for summary judgment (dkt. #97). Grand River also argues that the amendment is futile, but given that the issue will be resolved on summary judgment in any event, the court declinesto cut off VMR's discussion of judicial estoppel at the pleading stage and will instead address VMR's arguments in ruling on the fully-briefed motion for summary judgment.3
Plaintiff Grand River is a cigarette manufacturer, doing business as a corporation under the laws of Canada, with its offices in Ontario, Canada. Grand River has neither a parent company nor subsidiaries in the United States; similarly, it has neither a marketing or sales department, nor any offices in the United States. Rather, Grand River sells its tobacco products, including cigarettes, to importers on an F.O.B. basis, who in turn sell and distribute Grand River's products in the United States. Those importers are licensed to import tobacco products in the United States and include Tobaccoville, USA, Inc. ("Tobaccoville"), which is located in Hartsville, South Carolina; Native Wholesale Supply Company; Lake Erie Tobacco Company; Canadian Agricultural Depo; Empire Tobacco Company; and Rock River Manufacturing. Grand River also sells electronic cigarettes, or "e-cigarettes," under the name "ESENECA."
Defendant VMR, a Florida limited liability company, was founded in 2009 and is located in Miami, Florida. It sells various brands of e-cigarettes under the brand names V2 Cigs, Vapor Couture and Vantage Vapor. E-cigarettes differ from traditional cigarettes in a number of ways. First, they are battery-operated rather than combustible, potentiallymaking them rechargeable and reusable. Second, e-cigarettes weigh more than traditional cigarettes. Third, they function by means of liquid cartridges that produce an inhalable vapor, rather than combustible smoke. Fourth, e-cigarettes may be disassembled and put back together, while traditional cigarettes cannot. Finally, unlike traditional cigarettes, e-cigarettes do not emit an odor.
In 2008, Grand River selected the COUTURE mark for its cigarettes sold in the United States. On December 22, 2008, it filed an intent-to-use trademark application for the COUTURE mark with the U.S. Patent and Trademark Office. Since 2009, Grand River has sold cigarettes to an exclusive list of importers under this mark and now owns a federal trademark registration for COUTURE, No. 3,729,797, for use in connection with cigarettes. On August 9, 2012, Grand River also filed federal trademark application no. 85/699,543 for use of the COUTURE mark in connection with ashtrays, cigarette lighters, cigarette rolling papers, cigarette tubes, cigarettes and matches. On or about June 21, 2013, Grand River filed for the mark "COUTURE" for e-cigarettes in Canada.
In late 2010 or early 2011, VMR came up with the concept of selling a fashionable e-cigarette brand as a luxury item. The goal was to create an e-cigarette that was different from other brands, including in appearance. VMR's Chief Executive Officer, Jan Verleur, and the company's President, Dan Recio, considered a variety of names for their conceptualized brand. After settling on fewer than ten possibilities, they searched to determine whether any of the corresponding internet domain names were available. Thesearch revealed that only two prospects had available domain names: Vapor Lady and Vapor Couture. The latter was deemed the better choice for the product, and VMR purchased the domain name.
On October 19, 2011, VMR filed intent-to-use trademark application no. 85/450,714 for the mark VAPOR COUTURE, for use in connection with "electronic cigarettes ... as an alternative to traditional cigarettes, not including smokeless tobacco, and smokeless cigarette vaporizer." (See Burkland Decl. Ex. E.) Grand River subsequently filed opposition no. 91205692 to the VAPOR COUTURE mark, so VMR's application has not yet matured into a registration. On February 14, 2012, the PTO sent a letter requiring that VMR "disclaim the descriptive word 'VAPOR' apart from the mark as shown because it merely describes a feature and characteristic of the goods." (See id. at Ex. F, 2.)5 VMR amended its application to add the requested disclaimer on March 2, 2012. (Id. at 32-33.)
Couture cigarettes are slim-style cigarettes intended to appeal to fashion-conscious women within the general target market of current adult smokers. The trade name was chosen to communicate the concept of fashionable, high-end or upscale products to its customers. The packaging also contains the word "slims," intended to communicate to customers that the product is a "slim cigarette." Couture cigarette packaging comes in jewel and precious stone-inspired colors and themes, including ruby, amethyst, aquamarine,diamond, sapphire and turquoise. While the packaging has jewel-toned accents, it is primarily white, with gold lettering, as in the examples below:
Image materials not available for display.
(See Burkland Decl. Ex. C (dkt. #59-3).)
Traditional tobacco cigarettes, like Couture, are subject to numerous limitations, including a prohibition on their sale over the Internet. They are also subject to advertising restrictions, importation limitations, packaging and labeling restrictions, special taxes, and geographic use restrictions. As such, Grand River views itself as a "highly regulated manufacturer" and considers itself to operate in "a generally hostile environment."
Since its first use of the COUTURE mark in 2009, Grand River has seen some sales of those products, with an initial spike leading to annual sales of approximately half a million dollars. In subsequent years, revenues on COUTURE products have declined bymore than half.
Vapor Couture's packaging is white and purple with gold lettering, and it was designed to be more visually appealing compared to VMR's V2 Cigs packaging. The Vapor Couture website contains the following image of the product and its packaging:
Image materials not available for display.
(Burkland Decl. Ex. H (dkt. #59-8).) The word "vapor" is present and visible on all advertising materials connected with Vapor Couture products.
Vapor Couture e-cigarettes may be used with a variety of cartridges. Those cartridges come in numerous flavors, some of which are available without nicotine. Vapor Couture is primarily an online brand, accounting for 15% of all of VMR's online sales. 30% of VMR's sales are offline; of those sales, Vapor Couture amounts to less than 5%. In certain instances, VMR sells the accompanying USB charger and wall adapter in a Vapor Couturestarter kit, which contains the e-cigarette, accessories and packaging inserts. The starter kit appears in certain advertisements, along with the USB charter and wall adapter.
Only 21 physical retail locations currently sell VMR's Vapor Couture e-cigarettes, including Smokie's Discount Shop in Milwaukee, Wisconsin; the Sunrise Smoke Shop in Ft. Lauderdale, Florida; the Tobacco Shop in Jackson, Mississippi; Scullin Oil in Sunbury, Pennsylvania; and Smoke-and-Go in Abbeville, Louisiana. On April 23, 2013, however, VMR issued a press release announcing that it would enter into a strategic partnership with National Tobacco Company,...
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