Lontex Corp. v. Nike, Inc.

• Decision Date: 10 June 2019
• Docket Number: CIVIL ACTION NO. 18-5623
• Parties: LONTEX CORPORATION, v. NIKE, INC.
• Court: U.S. District Court — Eastern District of Pennsylvania

384 F.Supp.3d 546

LONTEX CORPORATION,

v.NIKE, INC.

CIVIL ACTION NO. 18-5623

United States District Court, E.D. Pennsylvania.

Filed June 10, 2019

Andrew D. Skale, Mintz Levin Cohn Ferris Glovsky & Popeo, Ben L. Wagner, Troutman Sanders LLP, San Diego, CA, Michael B. Dubin, Semanoff, Ormsby, Greenberg & Torchia, LLC, Huntingdon Valley, PA, for Lontex Corporation.

Francis W. Ryan, Marc E. Miller, DLA Piper LLP, New York, NY, Gina L. Durham, DLA Piper LLP, San Francisco, CA, Ben C. Fabens-Lassen, DLA Piper US LLP, Darius C. Gambino, DLA Piper Rudnick Gray Cary US, LLP, Philadelphia, PA, for Nike, Inc.

MEMORANDUM RE: PARTIAL MOTION TO DISMISS

Baylson, District Judge.

I. Introduction

In this case, Plaintiff Lontex Corporation ("Lontex") alleges that Defendant Nike, Inc. ("Nike") committed trademark infringement in violation of the Lanham Act and state law by selling athletic apparel with Lontex's registered "COOL COMPRESSION" mark without authorization. The First Amended Complaint (ECF 20, "FAC") alleges five Counts:

1. Count I : Trademark infringement under the Lanham Act, 15 U.S.C. § 1114 ;

2. Count II : Trademark infringement under the Lanham Act, 15 U.S.C. § 1125(a) ;

3. Count III : Contributory trademark infringement under the Lanham Act, 15 U.S.C. §§ 1114, 1125(a) ;

4. Count IV : Trademark infringement under the common laws of California, Florida, Texas, New York, New Jersey, North Carolina, Maryland, Massachusetts, Illinois, Georgia, Colorado, Minnesota, Washington, and the District of Columbia; and

5. Count V : Statutory trademark infringement and unfair competition under the laws of Florida, California, New York, New Jersey, North Carolina, Massachusetts, Illinois, Georgia, Colorado, Minnesota, and Washington.

Presently before this Court is Nike's Partial Motion to Dismiss the counterfeiting claims in Counts I and III of the FAC under Federal Rule of Civil Procedure 12(b)(6). (ECF 23, "MTD.") Lontex's request to amend the FAC, to which Nike has objected, is also pending. In the Response in opposition to the Motion, Lontex argues that the Court should permit Lontex to amend the FAC. (ECF 24, "Resp." at 21–22.) At oral argument on the Motion, the Court raised the possibility of amending the FAC to remove allegations of counterfeiting in Counts I and III and add a separate claim for counterfeiting as Count VI. (ECF 32, 33.)¹ Following oral argument, the parties filed a Joint Submission in which Lontex agreed to the Court's proposal, Nike objected, and Lontex attached a proposed counterfeiting claim as Exhibit 1 ("Proposed Claim"). (ECF 34; id. Ex. 1.)

For the reasons discussed below, the Court reaches the following conclusions:

1. The Partial Motion to Dismiss is GRANTED, with prejudice; and

2. Lontex's request to amend the FAC is DENIED.

II. Factual Background

Taking Lontex's allegations as true, the factual background is as follows. Lontex, a Pennsylvania corporation, has been providing professional and collegiate sports teams with athletic apparel since 1989. (FAC ¶¶ 4, 10.) By 2006, Lontex was well-regarded, including amongst the National Football League, collegiate sports teams, and sports medicine doctors. (Id. ¶ 10.) As early as June 18, 2007, Lontex launched its COOL COMPRESSION line of clothing, including compression shirts, shorts, tights, and socks. (Id. ¶ 1.)

On April 22, 2008, Lontex's "COOL COMPRESSION" trademark was registered by the United States Patent and Trademark Office ("USPTO") for a variety of men's, women's, and children's clothing. (Id. Ex. A.)² The trademark consisted of "standard characters without claim to any particular font, style, size, or color." (Id. )

On the same day, the USPTO registered Lontex's design mark, below, for the same category of clothing. (Id. )

The following year, on April 28, 2009, the USPTO registered Lontex's COOL COMPRESSION trademark for compression supports for medical use, including compression sleeves, tights, and leggings. (Id. )³ None of the trademarks gave Lontex the exclusive right to use "Compression" apart from "COOL COMPRESSION." (Id. )

Lontex has since sold millions of dollars of COOL COMPRESSION apparel and compression supports across the United States, representing over 40,000 COOL COMPRESSION goods covered by the trademarks. (Id. ¶ 17.) Lontex's COOL COMPRESSION line is popular throughout the country among customers, including professional sports teams. (Id. ¶ 10.) COOL COMPRESSION goods have been promoted through a variety of distribution channels, including direct-to-consumer websites, doctor and medical referrals, sports organizations, and speaking engagements by Lontex staff. (Id. )

Nike is an Oregon corporation with its principal place of business in Beaverton, Oregon. (Id. ¶ 5.) On or about January 2016, Lontex discovered that Nike had been selling apparel under the COOL COMPRESSION trademark since at least October 2015. (Id. ¶ 19.)⁴ Nike has been using COOL COMPRESSION as its product mark next to its separate house mark "NIKE PRO." (Id. ¶ 20.) For example, a sample Nike catalogue listed six COOL COMPRESSION clothing items, including "728044 NIKE PRO COOL COMPRESSION SLEEVELESS TOP." (Id. ) Nike's products have also been advertised, promoted, and sold using the COOL COMPRESSION product mark without "NIKE PRO" or any other Nike house mark near or next to it. (Id. ¶ 23.)

Nike's COOL COMPRESSION items were placed in Nike catalogues, including baseball, basketball, football, and training catalogues. (Id. ¶ 24.) In addition to selling COOL COMPRESSION products direct-to-consumers, Nike has sold and distributed this allegedly infringing athletic apparel to its authorized distributors, resellers, and retailers, including REI, Target, Macy's Zappos, Dick's Sporting Goods, East Bay, Foot Locker, and Amazon (hereinafter, "Prohibited Intermediaries"). (Id. ¶¶ 26–27.) Nike has also monitored promotional advertising with respect to its use of COOL COMPRESSION. (Id. ¶ 26.) Neither Nike nor these Prohibited Intermediaries have authorization or approval to sell COOL COMPRESSION products. (Id. ¶¶ 28–29, 34.) Though Nike "indicated" that it would cease use of the COOL COMPRESSION mark after a "demand letter identifying the infringement of the registered COOL COMPRESSION mark was sent," Nike's catalogues and sales through the Prohibited Intermediaries continued to make use of the COOL COMPRESSION mark. (Id. ¶¶ 26, 47.)⁵ Nike has made over $ 40 million in estimated profits on its COOL COMPRESSION line of products. (Id. ¶ 35.)

Nike's use of the COOL COMPRESSION mark has created confusion amongst consumers by indicating that Nike is affiliated with Lontex and obtained access to Lontex's COOL COMPRESSION technology. (Id. ¶ 31.)⁶ Lontex has received reports from its professional sports team clients that Nike's compression products are substantially inferior in performance to Lontex's products. (Id. ¶ 33.)

III. Procedural History

The original Complaint was filed in this Court on December 31, 2018, setting forth four Counts: (1) direct trademark infringement under the Lanham Act, 15 U.S.C. § 1114 ; (2) direct trademark infringement under § 1125(a) ; (3) contributory trademark infringement under §§ 1114 and 1125(a) ; and (4) unfair competition under state statutory and common law (ECF 1). On February 19, 2019 Nike filed a Partial Motion to Dismiss Count I to the extent it asserted a claim for federal trademark counterfeiting and Count IV in its entirety (ECF 18).

The FAC was filed on March 12, 2019 (ECF 20), rendering Nike's Partial Motion to Dismiss moot (ECF 22). On March 26, 2019, Nike filed a Partial Motion to Dismiss Counts I and III of the FAC to the extent that they assert claims for trademark counterfeiting (ECF 23). Nike does not move to dismiss Lontex's claims for trademark infringement in Counts I or III. There is also no Motion to Dismiss Counts II, IV, or V.⁷ Lontex filed a Response in opposition on April 8, 2019 (ECF 24), and Nike filed a Reply on April 15, 2019 (ECF 25, "Rep.").

On April 30, 2019, following a Rule 16 pretrial conference on that date, the Court issued a scheduling order for discovery, dispositive motions, and additional pretrial and trial procedures (ECF 28, 29). On May 23, 2019, the Court held oral argument on the Partial Motion to Dismiss and discovery issues (ECF 32, 33). Following oral argument, and pursuant to the Court's orders, the parties submitted a Joint Submission regarding the Partial Motion to Dismiss (ECF 34). Attached to the submission was Lontex's Proposed Claim of counterfeiting, as well as exhibits depicting Lontex and Nike's compression products (ECF 34 Ex. 1).

IV. Legal Standard

In considering a motion to dismiss under Rule 12(b)(6), the Court "accept[s] all factual allegations as true [and] construe[s] the complaint in the light most favorable to the plaintiff." Warren Gen. Hosp. v. Amgen, Inc., 643 F.3d 77, 84 (3d Cir. 2011) (internal quotation marks and citations omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).

The Court in Iqbal explained that, although a court must accept as true all of the factual allegations contained in a complaint, that requirement does not apply to legal conclusions; therefore, pleadings must include factual allegations to support the legal claims asserted. Iqbal, 556 U.S. at 678, 684, 129 S.Ct. 1937. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ); see also Phillips v. Cty. of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (citing Twombly, 550 U.S. at 556 n.3, 127 S.Ct. 1955 ) ("We caution that without some factual allegation in the complaint, a claimant cannot satisfy...