JFJ Toys, Inc. v. Sears Holdings Corp., Civil Action No. PX–14–3527

Decision Date21 February 2017
Docket NumberCivil Action No. PX–14–3527
Citation237 F.Supp.3d 311
Parties JFJ TOYS, INC., et al., Plaintiffs, v. SEARS HOLDINGS CORPORATION, et al., Defendants.
CourtU.S. District Court — District of Maryland

Arnold P. Lutzker, Benjamin S. Sternberg, Jeannette Maurer Carmadella, Susan J. Lutzker, Lutzker and Lutzker LLP, Washington, DC, for Plaintiffs.

Gabriel H. Halpern, Pinilis Halpern LLP, Morristown, NJ, H. David Starr, The Nath Law Group, Alexandria, VA, for Defendants.

MEMORANDUM OPINION

Paula Xinis, United States District Judge

Pending is a Motion to Exclude the expert report and testimony of Peter Magalhaes (ECF No. 82) and a Motion for Partial Summary Judgment (ECF No. 71) filed by Plaintiffs/Counter Defendants JFJ Toys, Inc. and Fred Ramirez (collectively, "Plaintiffs"). The issues are fully briefed and the Court now rules pursuant to Local Rule 105.6 because no hearing is necessary. For the reasons stated below, Plaintiffs' Motion to Exclude is granted and Plaintiffs' Motion for Partial Summary Judgment is granted in part and denied in part.

I. BACKGROUND1

Plaintiff JFJ Toys, Inc. d/b/a D&L Company ("JFJ") is the manufacturer and distributor of a children's toy product—an air missile toy known and trademarked as STOMP and STOMP ROCKET. ECF No. 1 at 1; Declaration of Fred Ramirez, ECF No. 71–6 at 2. The air missile toy was manufactured and sold by JFJ until on or about January 1, 2015, when D&L Company LLC ("D&L") was formed. ECF No. 71–6 at 2. Plaintiff Fred Ramirez ("Plaintiff Ramirez") is the sole owner of D&L. ECF No. 71–6 at 2. D&L is now responsible for the manufacture and sale of Plaintiffs' STOMP ROCKET brand products under a license from Plaintiff Ramirez. ECF No. 71–6 at 2.

In 1992, Plaintiff Ramirez began marketing the "Stomp Rocket." ECF No. 71–6 at 1. On February 2, 1999, "STOMP ROCKET" was registered by Plaintiff Ramirez with the United States Patent and Trademark Office ("USPTO"), under U.S. Registration No. 2,221,554, for use in connection with "toys, namely, flying winged tubes and structural parts therefor" (the "Stomp Rocket Registration"). See ECF No. 71–11. The Stomp Rocket Registration was renewed on June 26, 2008, and it became incontestable under 15 U.S.C. § 1065 on October 30, 2009. ECF No. 71–15. On April 4, 2000, "STOMP" was registered by Plaintiff Ramirez with the USPTO, under Registration No. 2,338,580, for use in connection with "toys, namely, flying winged tubes and structural parts therefor" (the "Stomp Registration"). ECF No. 71–16. The Stomp Registration became incontestable under 15 U.S.C. § 1065 on June 27, 2006, and was last renewed on August 23, 2010. ECF No. 71–16 at 3.

Since 1992, JFJ and D&L have produced several versions of the Stomp Rocket brand air missile toys, including the Stomp Rocket, Super Stomp Rocket, Junior Stomp Rocket, Ultra Stomp Rocket, Stomp Rocket Super High Performance, Stomp Rocket Ultra, Stomp Rocket Ultra LED, Stomp Rocket Jr. Glow, and Dueling Stomp Rocket. ECF No. 71–6 at 2; ECF No. 71–37. All versions of the Stomp Rocket brand toy use an air bladder and flex tubing to launch lightweight, winged missiles into the air. ECF No. 71–6 at 2. However, Plaintiffs' Stomp Rocket kits vary in the number of missiles included, the type of materials used in manufacturing, the projectile flight path (100'–400') and the targeted age group (three and up to eight and up). Id. Since 1992, Stomp Rocket brand air missile toys have sold more than 5 million units and have won awards from iParenting Media (Hot Toy and Excellent Product Awards) and Creative Child Magazine (Top Toy of the Year, Seal of Excellence and Preferred Choice Awards). See ECF No. 71–6 at 2; ECF No. 95–1.

Defendant Sears Holding Corporation is the holding company of Defendants Sears and Roebuck, Co. and Kmart Corporation (collectively, "Sears"), which operate approximately 1,700 retail stores in the United States, selling tens of thousands of products including children's toys. ECF No. 78–19 at 2 (Sears Holding Corporation's public business profile). In 2013, Defendants entered into an agreement with Toy Quest Ltd. (the "Purchase Order") to purchase 10,596 units of a BANZAI-brand air missile toy called the Stomp Rocket (the "Banzai Stomp Rocket"). See ECF No. 72–1.2

Defendants began selling the Banzai Stomp Rocket on January 14, 2014, online on Sears.com and Kmart.com and in Kmart retail stores. See ECF No. 71–38 at 4; ECF No. 71–39; ECF No. 72–19 at 8. When Defendants began selling the Banzai Stomp Rocket, Defendant Sears was simultaneously selling Plaintiffs' Stomp Rocket Ultra, Stomp Rocket Junior Glow, Stomp Rocket High Performance, Dueling Stomp Rocket, and Stomp Rocket Ultra LED on its website, www.sears.com. ECF Nos. 71–40, 71–41, 71–42, 71–43.The Banzai Stomp Rocket sold by Defendants uses a mark that includes the words "Stomp Rocket." ECF No. 95–7 (see below for photograph of Defendants' Banzai Stomp Rocket on left and Plaintiffs' Super Stomp Rocket on right).

Defendants' Product
Plaintiffs' Product

On April 29, 2014, Seth Ramirez, General Manager of JFJ and D&L, became aware that Defendant Kmart was selling the Banzai Stomp Rocket on Defendant's website www.kmart.com. Declaration of Seth Ramirez, ECF No. 71–8 at 1. Shortly thereafter, on May 4, 2014, Plaintiffs' counsel sent a cease and desist letter to Defendants. ECF No. 95–7 at 2. Plaintiffs sent a second cease and desist letter on May 19, 2014. ECF No. 95–7 at 5. On June 17, 2014 and again on June 26, 2014, Plaintiffs' counsel, Susan Lutzker, purchased the Banzai Stomp Rocket from www.kmart.com. See ECF No. 95–7 at 11–15. In each case, the email purchase confirmation used the mark "Stomp Rocket" to refer to the item purchased by Ms. Lutzker. Id. Following receipt of the cease and desist letter, Kmart purchased air missile toys for the following season from Toy Quest which had been repackaged as the BANZAI Power Launcher Rocket. Declaration of Keith Hobson, ECF No. 78–1 at 3; No. 78–4.

Plaintiffs filed the present action on November 11, 2014, and amended their Complaint on February 2, 2015, bringing claims of trademark counterfeiting under Section 32 of the Lanham Act, 15 U.S.C. § 1114(1) (Count I), trademark infringement under Section 32 of the Lanham Act, 15 U.S.C. § 1114(1) (Count II), false designation of origin under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1) (Count III), trademark infringement under the Maryland common law (Count IV), unfair trade practices under the Maryland Consumer Protection Act, Md. Code Ann., Comm. Law § 13–101 et seq. (Count V), and unfair competition under Maryland common law (Count VI). See ECF No. 34.

On February 20, 2015, Defendants filed their Answer to the Amended Complaint and a Counterclaim for cancellation of the "Stomp" and "Stomp Rocket" trademark registrations on the grounds that the marks are generic. ECF No. 41. On June 10, 2016, Plaintiffs moved for summary judgment on Defendants' liability as to all claims. ECF No. 71. And on August 11, 2016, Plaintiffs moved to exclude the expert report and testimony of Peter Magalhaes. ECF No. 82.

II. DISCUSSION
A. Plaintiffs' Motion to Exclude the Expert Report and Testimony of Peter Magalhaes

Defendants named a "toy marketing expert," Peter Magalhaes, who intends to testify as to (1) whether the term "Stomp" or "Stomp Rocket" has acquired secondary meaning as a registered trademark in the toy industry; (2) whether the term "Stomp" or "Stomp Rocket" is a generic term; and (3) whether there is confusion between the Plaintiffs' Stomp Rocket and the Banzai Stomp Rocket. Expert Report of Peter Magalhaes, ECF No. 82–3 at 2.

Plaintiffs urge the Court to exclude this expert opinion pursuant to Rule 702 of the Federal Rules of Evidence for its lack of reliability and relevance. Plaintiffs so urge because Mr. Magalhaes possesses little to no relevant training, education and experience to render an opinion in this area. ECF No. 82–1 at 2. Plaintiffs further question the reliability of Mr. Magalhaes' opinion on two grounds: insufficient methodology and Mr. Magalhaes' role as an interested party in the litigation. ECF No. 82–1 at 2, 3. Finally and in the alternative, Plaintiffs argue that Mr. Magalhaes' testimony is not helpful to the trier of fact because it is phrased in conclusory terms and merely opines on the ultimate legal issue, thereby usurping the fact-finding mission of the jury. ECF No. 82–1 at 5.

Rule 702 contemplates that the court will evaluate whether the testimony is reliable and will aid the ultimate trier of fact. Westberry v. Gislaved Gummi AB , 178 F.3d 257, 260 (4th Cir. 1999). The proponent of the expert testimony bears the burden of establishing its admissibility by a preponderance of evidence. Cooper v. Smith & Nephew, Inc. , 259 F.3d 194, 199 (4th Cir. 2001). Rule 702 provides:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702. Courts have distilled Rule 702's requirements into two crucial inquiries: whether the proposed expert's testimony is relevant and reliable. Kumho Tire Co. v. Carmichael , 526 U.S. 137, 141, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999) ; United States v. Forrest , 429 F.3d 73, 80 (4th Cir. 2005). The trial court must carry out the special gatekeeping obligation of ensuring that expert testimony meets both requirements. Kumho Tire , 526 U.S. at 147, 119 S.Ct. 1167.

1. The Reliability of Mr. Magalhaes' Opinions

Plaintiffs urge the Court to apply strictly the factors articulated in Daubert v. Merrell Dow Pharm., Inc. , 509 U.S. 579, 589, 113 S.Ct....

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