Jae Enters., Inc. v. Oxgord Inc.
| Decision Date | 02 March 2016 |
| Docket Number | CIVIL ACTION NO. 5:15-CV-228-TBR |
| Parties | JAE ENTERPRISES, INC., Plaintiff, v. OXGORD INC., et al., Defendants. |
| Court | U.S. District Court — Western District of Kentucky |
This matter comes before the Court upon Defendants' OxGord, Inc. and Day to Day Imports, Inc. Motion to Dismiss. (Docket No. 20.) Plaintiff Jae Enterprises, Inc. has responded, (Docket No. 22), and Defendants have replied. (Docket No. 24.) Fully briefed, this matter is ripe for adjudication. For the reasons enumerated below, the Court will DENY Defendants' Motion.
Plaintiff Jae Enterprises, Inc. ("Jae") provides aftermarket automobile accessories. (Docket 1 at 3.) Defendants OxGord, Inc. and Day to Day Imports, Inc. ("Defendants") also sell automobile parts and accessories. (Docket No. 1 at 4.)
Jae's automobile and truck accessories are sold under a federal trademark registration for the mark "Eagle Flight," Reg. No. 4037849. (Docket No. 1 at 3.) "In addition to its word mark 'Eagle Flight,' Jae uses designs as trademarks, including Federal Reg. Nos. 3049289 and 1838404." Id. The design trademarks contain "stylized depictions of the Eagle Flight brand." Id. According to Jae, it distributes its Eagle Flight goods by either selling them to its customers directly or by selling them to wholesale distributors who then sell the goods to consumers. Id. When Jae sells directly to its customers, it does so through its own website as well as through internet retailers like Amazon. Id. at 3-4.
Jae and the Defendants entered into a distribution agreement. Id. at 4. Under the agreement, Defendants purchased Eagle Flight products from Jae and then re-sold the products to end customers in a manner of their choosing. Id. The Defendants re-sold the products through internet retailers such as Amazon. Id. In fact, Defendants were "co-listed alongside Jae on Amazon under Eagle Flight product listings." Id. According to the Defendants, each product sold on Amazon has a product detail page, and "[t]he first seller to offer a product for sale creates the product detail page . . . and is said to 'own' that page." (Docket No. 20-1 at 2.) Then other sellers offering the same product list their product "against" the original product detail page, and customers "can view all potential sellers of a product from the same page." Id.
Eventually, the parties' relationship deteriorated. (Docket No. 1 at 4.) On October 3, 2013, Jae informed the Defendants by letter that effective October 15, 2013, Jae was terminating its business relationship with them. Id. Even after their business relationship ended, both parties agree that the Defendants were lawfully permitted to sell any remaining Eagle Flight products that they had purchased under the distribution contract. (Docket Nos. 1 at 4; 20-1 at 3.) Defendants state that they continued to list the Eagle Flight products they had remaining on Amazon. (Docket No. 20-1 at 3.) Alternatively, Jae contends that two years after the parties' relationship ended the "Defendants continued to advertise and sell non-Eagle Flight products under the 'Eagle Flight' mark after running out of Eagle Flight products to fill orders." (Docket No. 1 at 5.) Jae argues that multiple customers received generic non-Eagle Flight products despite having ordered what they believed to be Eagle Flight products advertised by the Defendants on Amazon. Id. Jae also alleges that the Defendants "purposefully delayed shipments to customers," and when customers complained about the shipping delay, the Defendants responded that the delay was due to "quality issues" with the manufacturer, i.e. Jae. Id.
In addition to selling non-Eagle Flight products under the Eagle Flight mark, Jae contends that the Defendants "gained administrative access" to its product listings on Amazon and changed the listings to state incorrect information. Id. In particular, Defendants allegedly changed the listings to state such incorrect information as "a particular product only fits a certain style of truck, that a listing is only for a single product as opposed to an entire set, and changed the model year with which a particular product is compatible." Id. Following the Defendants' alleged alterations to Jae's product listings, Jae informed Amazon that the Defendants were no longer authorized distributors of Eagle Flight products. Id. Jae subsequently requested that Amazon remove the Defendants from its product listings, and Amazon complied with Jae's request. Id.
Lastly, Jae alleges that the Defendants called their customers who had purchased Eagle Flight products and provided a positive review of the products on Amazon. Jae contends that the Defendants offered these customers a full refund for the Eagle Flight product they purchased if they agreed to change their positive review to a negative one. Id. at 6. Jae states that it has an audio recording of one of these alleged calls. Id.
As a result of the Defendants' alleged actions, Jae filed this action on October 23, 2015.
A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In order to survive a motion to dismiss under Civil Rule 12(b)(6), a party must "plead enough 'factual matter' to raise a 'plausible' inference of wrongdoing." 16630 Southfield Ltd. P'ship v. Flagstar Bank, F.S.B., 727 F.3d 502, 504 (6th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). A claim becomes plausible "when the plaintiff pleads factual content that allows the court to draw the reasonableinference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). Should the well-pleaded facts support no "more than the mere possibility of misconduct," then dismissal is warranted. Id. at 679. The Court may grant a motion to dismiss "only if, after drawing all reasonable inferences from the allegations in the complaint in favor of the plaintiff, the complaint still fails to allege a plausible theory of relief." Garceau v. City of Flint, 572 F. App'x 369, 371 (6th Cir. 2014) (citing Iqbal, 556 U.S. at 677-79).
Defendants contend that Jae's Complaint should be dismissed in its entirety under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Specifically, the Defendants argue that Jae's claims for (1) trademark infringement; (2) product disparagement; (3) false advertising; (4) false designation of origin; (5) unfair competition; (6) defamation; and (7) tortious interference with a prospective business advantage are "deficient under both federal and state law." (Docket No. 20-1 at 1.) The Court will address the viability of each of the aforementioned claims below.
The Lanham Act protects registered patents, trademarks, and copyrights. Coach, Inc. v. Goodfellow, 717 F.3d 498, 502 (6th Cir. 2013). With regard to trademark infringement, the Lanham Act states the following:
15 U.S.C. § 1114(1)(a), (b). In order to prove trademark infringement, a party must show "(1) that it owns a trademark, (2) that the infringer used the mark in commerce without authorization, and (3) that the use of the alleged infringing trademark 'is likely to cause confusion among consumers regarding the origin of the goods offered by the parties.'" Goodfellow, 717 F.3d at 502 (quoting Leelanau Wine Cellars, Ltd. v. Black & Red, Inc., 502 F.3d 504, 515 (6th Cir. 2007)). There is also an exception known as the "first sale" exception which provides a defense to a claim of trademark infringement. Brilliance Audio, Inc. v. Haights Cross Commc'ns, Inc., 474 F.3d 365, 369 (6th Cir. 2007). The Defendants have attacked Jae's trademark infringement claims on the grounds that (1) they have not "used" the Eagle Flight mark in commerce, (2) there was not a likelihood of consumer confusion, and (3) they had Jae's consent to advertise and sell Eagle Flight products. (Docket No. 20-1 at 7-12.)
The Court will first address the Defendants' argument concerning their "use" of the Eagle Flight mark. A trademark is deemed to be "used in commerce" when "it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and the goods are sold or transported in commerce." 15 U.S.C. § 1127; see also Rohn v. Viacom Int'l, Inc., No. 1:14-CV-83, 2015 WL 4395280, at *3 (W.D. Mich. July 15, 2015). Goods sold through the internet fall under the jurisdiction of the Lanham Act as the internet is "an instrumentality of interstate commerce."Ford Motor Co. v. Heritage Mgmt. Grp., Inc., 911 F. Supp. 2d 616, 622 (E.D. Tenn. 2012) (quoting Utah Lighthouse Ministry v. Found. for Apologetic Info. & Research, 527 F.3d 1045 (10th Cir. 2008)).
Under 15 U.S.C. § 1127, a trademark is used in commerce when "it is placed in any manner on . ....
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