Jergenson v. Inhale Int'l
| Decision Date | 12 January 2023 |
| Docket Number | 22 CV 2040 |
| Parties | PHILLIP JERGENSON, Plaintiff, v. INHALE INTERNATIONAL LIMITED, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Plaintiff Phillip Jergenson alleges that internet sellers infringed on his trademarks and sold counterfeit products. He brings claims for trademark infringement, counterfeiting, false advertising, conspiracy, and violation of the Illinois Uniform Deceptive Trade Practices Act, and moves for a preliminary injunction. I granted the injunction against the other defendants, but not against defendant Inhale International Limited, which appeared and opposes the motion. Inhale filed an answer seeking declaratory judgments of non-infringement and invalidity, and alleging fraud in the procurement of the marks and wrongful seizure. Jergenson moves to dismiss the counterclaims. For the reasons that follow, both the motion for a preliminary injunction and the motion to dismiss are granted.
A preliminary injunction is “an extraordinary remedy never awarded as of right.” See Winter v. Nat. Res Def. Council, Inc., 555 U.S. 7, 24 (2008) (citation omitted). A plaintiff seeking a preliminary injunction must show that he will suffer irreparable harm, that traditional legal remedies would be inadequate, and that he has some likelihood of prevailing on the merits of his claims. Mays v. Dart, 974 F.3d 810, 818 (7th Cir. 2020) (quoting Speech First, Inc. v. Killeen, 968 F.3d 628, 637 (7th Cir. 2020)). If a plaintiff makes that initial showing, the court weighs the harm the denial of the preliminary injunction would cause against the harm to the defendant if the court grants the injunction. Courthouse News Serv. v. Brown, 908 F.3d 1063, 1068 (7th Cir. 2018).
To survive a motion to dismiss under Rule 12(b)(6), a complaint (or in this case an answer asserting counterclaims) must state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6). The answer must include “sufficient factual matter, 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 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In reviewing a motion to dismiss, a court must construe all factual allegations as true and draw all reasonable inferences in the claimant's favor. Sloan v. Am. Brain Tumor Ass'n, 901 F.3d 891, 893 (7th Cir. 2018) (citing Deppe v. NCAA, 893 F.3d 498, 499 (7th Cir. 2018)).
A party alleging fraud must do so with particularity. Fed.R.Civ.P. 9(b); see Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir. 2007) (citations omitted) (Claims that sound in fraud-meaning premised upon a course of fraudulent conduct-can implicate Rule 9(b)'s heightened pleading requirements); Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr. v. Walgreens Co., 631 F.3d 436, 446 47 (7th Cir. 2011) (citation omitted) (Rule 9(b) applies to “allegations of fraud, not claims of fraud.”). They must describe the “who, what, when, where, and how” of the fraud. Menzies v. Seyfarth Shaw LLP, 943 F.3d 328, 338 (7th Cir. 2019) (quoting Vanzant v. Hill's Pet Nutrition, Inc., 934 F.3d 730, 738 (7th Cir. 2019)).
Beginning in 1971, Jergenson sold smoking pipes through Proto Pipe LLC, a California limited liability company. [10] ¶¶ 5-6; [34-3] at 2-4.[1]Jergenson applied for trademark registration for the words “Proto Pipe” and for a “PP” logo in August 2018 and April 2019. [34-1] at 2; [34-2]. In his application, Jergenson told the Patent and Trademark Office that he owned the marks in a sole proprietorship, that the marks were first used in 1976, and categorized his products as International Class 34, smoking pipes. [34-1] at 2-3.[2]The registrations were approved on April 9 and October 29, 2019, and the PTO categorized the marks into Class 34. See [10-2]. According to the answer, however, Jergenson did not use the marks in a way that would establish trademark rights, [26] at 9, and stopped use of the mark for decades before attempting to reestablish use. Id. In attaining the marks, Jergenson allegedly lied to the PTO about his use of the pipes because the products were actually configured and intended to be drug paraphernalia. Id. at 10.
Jergenson advertised the proto pipe as a “Patented Tobacco Smoking System.” [34-1] at 9, and the product's instructions were aimed at tobacco users. See [51-1]. But there's an allegation that Jergenson's marks were used in conjunction with drug paraphernalia prohibited by federal law, [26] at 8, and that Jergenson designed, manufactured, and sold the pipes intending that the products would be used to consume marijuana and other illegal substances. Id. at 8-9. The brand was marketed to marijuana smokers, see [25] at 27, and some marijuana users endorsed the proto pipe. See id. at 11, 23-24, 29, 31, 33, 35. Proto Pipe LLC's website linked the development of the proto pipe business and the legality of marijuana. Id. at 4; [26] at 9; Phil Jergenson, About Us, Proto Pipe, https://protopipellc.com/pages/about-us (last visited Jan. 4, 2023).
A Los Angeles Times feature said that the proto pipe was known as “the Swiss Army knife of pot pipes.” [26] at 9; [25] at 11; Adam Tschorn, I needed answers. My hunt to find the backstory of the perfect pot pipe., Los Angeles Times (Oct. 27, 2021, 11:01 a.m.), https://www.latimes.com/lifestyle/story/2021-10-27/in-praise-of-the-proto-pipe-a-practically-perfect-piece-of-pot-paraphernalia. The pipe was designed to include the tools needed to smoke marijuana, including a “removable poker, a place to stow some weed and a permanent screen.” [25] at 14. The article noted that in 1987 Jergenson sold his pipe-making business. See id. at 16. The new owner of the business continued to make proto pipes for three decades, but during that period knockoffs proliferated and the proto pipe brand disappeared from the market. Id. at 16-17. Jergenson described his business in the 1980s as “paraphernalia manufactur[ing],” and wrote that to avoid the war on drugs he “turned the business over to a friend who did not smoke pot and labeled [the proto pipe] as a tobacco pipe.” [25] at 5. If marijuana legalization became imminent, the new owner and Jergenson agreed that Jergenson could return to the business. Id. Jergenson assumed control of the proto pipe brand for a second time in 2018. Id. at 17.
Inhale and other defendants ran internet stores that appeared to be selling genuine proto pipe products. [10] ¶ 13. But they actually sold inferior imitations branded with the trademarks. Id. Allegedly working together, defendants used Jergenson's marks to advertise and sell counterfeit items, causing confusion in the market despite knowing that Jergenson owned the trademarks. Id. ¶¶ 17-21, 23.
I issued an ex parte temporary restraining order enjoining all of the defendants from using Jergenson's trademarks, passing off counterfeit products as genuine, or transferring assets. [16]. There's an allegation that in seeking the order, Jergenson falsely represented to the court that his trademarks were valid and knew at the time that his products weren't protected under the Lanham Act. [26] at 10-11. By seeking the TRO, Jergenson caused Inhale to lose profits and suffer damage to its business, reputation, and goodwill in the marketplace. Id.
Jergenson bases his request for preliminary relief on claims for statutory trademark infringement, counterfeiting, and false designation of origin. See [20-1] at 6-8. To prevail on these claims, Jergenson must prove two elements: that his mark was protected under the Lanham Act and that the defendant's unauthorized use of the mark was likely to cause confusion. See 15 U.S.C. §§ 1114(1)(a), 1125(a)(1)(A); CAE, Inc. v. Clean Air Eng'g, Inc., 267 F.3d 660, 673-74 (7th Cir. 2001); Segal v. Geisa NYCLLC, 517 F.3d 501, 506 (7th Cir. 2008); H-D Michigan, Inc. v. Top Quality Serv., Inc., 496 F.3d 755, 759 (7th Cir. 2007) (citation omitted).
Jergenson has two registered trademarks, [10-2], and defendant doesn't dispute that Inhale's use of the words “proto pipe” on its products (which appear to be identical to those offered by Jergenson) was likely to cause confusion in the market. See [5-4] at 1-2; AutoZone, Inc. v. Strick, 543 F.3d 923, 929 (7th Cir. 2008) (citing Packman v. Chicago Trib. Co., 267 F.3d 628, 642 (7th Cir. 2001)). The only remaining issue is whether Jergenson's marks were protected by the Lanham Act. See [42] at 12-13.[3] To gain trademark protection, a registrant must represent to the Patent and Trademark Office that the mark they want to protect is in use in commerce. 15 U.S.C. § 1051(d)(1). The Trademark Trial and Appeal Board has interpreted that requirement to mean that a mark is in use in lawful commerce. See FN Herstal SA v. Clyde Armory Inc., 838 F.3d 1071, 1086 (11th Cir. 2016); 6 McCarthy on Trademarks and Unfair Competition § 31:58.50 (5th ed.). The issue of lawful use appears before the TTAB when a party opposes a pending trademark registration or wants to cancel a mark. See, e.g., Gen. Mills Inc. v. Health Valley Foods, 24 U.S.P.Q.2d 1270 (T.T.A.B. 1992); Satinie Societa in Nome Collettivo di S.A. e M. Usellini v. P.A.B. Produits et Appareils de Beaute, 209 U.S.P.Q. 958 (T.T.A.B. 1981). The TTAB will find a use unlawful if the issue of compliance has been previously determined by a court or government agency or when there has been a per se violation of a statute regulating the sale of a party's goods. See Armida Winery Inc. v. The Cuban, LLC, Cancellation No. 92065105, 2018 WL 3689355, at *13 (T.T.A.B Aug. 1, 2018).
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